(not hand written please)

Elliott is trying to determine it's optimal capital structure. The company's capital structure consists of debt and common stock. The company's investment bankers have given the following estimates for Ra. Bond rating Percent financed with debt 0.00 0.20 0.40 0.60 0.80 AAA AA A BBB BB Before tax cost of debt 7.0% 8.0% 10.0% 12.0% 15.0% Company uses CAPM to estimate it's cost of equity. The risk free rate is 5% and the market risk premium is 6%. Elliott estimates that if it had no debt, it's beta would be 1.2. Company's tax rate is 40% and growth rate is zero. The company estimates it's free cash flow to be 30 mn. On the basis this information, what is the company's optimal capital structure and what is the firm's cost of capital at this optimal capital structure