Problem $21-03$

A firm's current balance sheet is as follows:

a$.$ What is the firm's weighted$-$average cost of capital at various combinations of debt and equity, given the following information? Round your answers to one decimal place.

Assets $$140$ Debt $

Equity $

What course of action should the firm take? Round your answer to the nearest whole number.

Since the firm is currently using

c$.$ As a firm initially substitutes debt for equity financing, what happens to the cost of capital?

The cost of capital initially $\frac{?}{\text{b}\text{a}\text{r}}(de)$

d$.$ If a firm uses too much debt financing, why does the cost of capital rise?