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Jersey Computer Company has estimated the costs of debt and equity capital (with bankruptcy and agency costs) for various proportions of debt in its capital

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Jersey Computer Company has estimated the costs of debt and equity capital (with bankruptcy and agency costs) for various proportions of debt in its capital structure: Proportion of After-Tax Cost debt of Debt (k;) 0.00 o % Cost of Equity (ke) 10 % 0.10 4.7 10.25 0.20 4.9 10.5 0.30 5 12 0.40 5.5 12.5 0.50 7 12.75 0.60 7.5 13.5 Determine the firm's optimal capital structure, assuming a marginal income tax rate (T) of 40 percent.What is the WACC of the optimal capital structure? 10.12% should be entered as 10.12 Suppose that the firm's current capital structure consists of 30 percent debt (and 70% equity). How much higher is its weighted cost of capital than at the optimal capital structure? Round your answers to two decimal places. 10.12% should be entered as 10.12 Hint: you subtract the two WACCs

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