Problem 21-04 The financial manager of a fum determines the following schedules of cost of debt and cost of cuty for various combinations of debt financing: Debt/Assets 09 Alter Tax Cost of Debt Cost of Equity 9 10 9 20 30 40 10 50 12 10 20 17 a. Find the optimal capital structure that is optimal combination of debt and outy financing). Round your answers for the capital structure to the nearest whole number and for the cost of capital to the decinta place The optimal capital structure: debt and Souty with a cost of capital of b. Why does the cost of capital initially decline as the firm substitutes det for at fanong? The cost of capital initially declines because the cost of detect than the cost of equity c. Why will rest of funds eventually rise as the form becomes more financially leveraged? As the form becomes more financially leveraged and risker, the cost of detected and cause the cost of capital to increase d. Why is debt financing more common than financing with preferred sto? Debt flancing is more common the financing with preferred stock because of diect which makes the cost of the debt financing Select the cost of the preferred stock et interest were not a tax deductible expense, what efect would take on them cost of capita If interest were nocata deductible, the cost of debt would be check the cost otot