Problem 21-03 A firm's current balance sheet is as follows: 99 Assets $ 120 Debt $ 48 Equity $ 72 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 Debt/Assets After Tax Cost of Debt Cost of Equity Cost of Capital 0% 8% 15% 20 8 15 20 9 15 96 30 9 15 96 40 11 16 % 50 13 16 % 60 15 18 % b. Construct a pro forma balance sheet that indicates the firm's optimal capital structure. Choose the best structure from the options analyzed in part a. Compare this balance sheet with the firm's current balance sheet. Round your answers to the nearest dollar Assets 5120 Debt $ Equity $ What course of action should the firm take? Round your answer to the nearest whole number Since the firm is currently using debt financing, it selectat its optimal capital structure and select c. As a firem initially substitutes debt for equity financing, what happens to the cost of capital? The cost of capital initially select d. If a firm uses too much debt financing, why does the cost of capitale? If a firm uses too much debt financing, the firm becomes Select financially leveraged and ther. This causes the interest rate to select and the cost of equity to Select These changes in the cost of debt and equity cause the cost of capital to select 30 9 15 40 16 50 13 16 60 15 18 b. Construct a pro forma balance sheet that indicates the firm's optimal capital structure. Choose the best structure from the options analyzed in perta. Compare this balance sheet with the firm's current balance sheet. Round your answers to the nearest dollar Assets $ 120 Debt Equity What course of action should the form take? Round your answer to the nearest whole number Since the miscarently using debt financi, Select vat its ochmal capital structure and select c. As a firm nituilly substitutes debt fer equity financing what happens to the cost of capital The cost of capital in Select d. If formes much debt anong, why does the cost of capitalise If a firm uses too much debt financing the firm becomes et inancially leverandre. This causes the interest rate to select and the cost of quty to select These changes in the cost of debt and equity the cost of capito Belect