Problem 21-05 3. Given the following, determine the firm's optimal capital structure: Debt/Assets 0% After Tax Cost of Debt 8% B 10 20 30 Cost of Equity 12 12 12 12 14 15 17 9 9 50 10 11 Round your answers for capital structure to the nearest whole number and for the cost of capital to one decimal place. The optimal capital structure: debt and %equity with a cost of capital of b. If the firm were using 60 percent debt and 40 percent equity, what would that tell you about the firm's use of financial leverage? Hound your answer for the cost of capital to one decimal place If the firm uses 60% debt financing, it would be using Sunct financial leverage. At that combination the cost of capital is The firm could lower the cost of capital by substituting select c. What two reasons explain why debt is cheaper than equity? Debitis cheaper than equity because interest expense- In addition equity investors bear risk d. If the firmware using 30 percent debit and 70 percent equity and earned a return of 10.4 percent on an investment would this mean that stockholders would receive less than the required return of 12,0 percent? If the firm con 10.4% on an investment, the ockholders will not than the required 12.0% What retum would stockholders receive? Hound your answer to one decimal place