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Please use Excel to answer and show syntax/formulas for all calculations Reacher Technology has consulted with investment bankers and determined the interest rate it would
Please use Excel to answer and show syntax/formulas for all calculations
Reacher Technology has consulted with investment bankers and determined the interest rate it would pay for different capital structures, as shown below. Data for the risk-free rate, the market risk premium, an estimate of Reacher's unlevered beta, and the tax rate are also shown below. Based on this information, what is the firm's optimal capital structure and what is the weighted average cost of capital at the optimal structure? Input Data Risk-free rate Market risk premium Unlevered beta Tax rate 4.5% 5.5% 0.8 Percent Financed with Before-tax Cost Debt (rd) 6.0% 6.1% 7.0% 8.0% 10.0% 12.5% 15.5% 18.0% Debt (wd) 40.0% 0% 10% 20% 30% 40% 50% 60% 70% Fill in formulas in the yellow cells to find the optimum capital structure Debt/Value Equity/ValueDebt/Equity A-T Cost of Ratio (wd Ratio (ws)Ratio (wd/ws)Debt (rd) Levered Beta Cost of Equity WACC 0% 10% 20% 30% 40% 50% 60% 70% 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.00 0.11 0.25 0.43 0.67 1.00 1.50 2.33 WACC at optimum debt ratio Optimum debt ratioStep by Step Solution
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