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Problem 3 Burleson Clinic has obtained the following estimates for its costs of debt and equity at various capital structures: After-Tax Cost of Debt (%)

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Problem 3 Burleson Clinic has obtained the following estimates for its costs of debt and equity at various capital structures: After-Tax Cost of Debt (%) Cost of Equity (%) Proportion of Debt 0% 20% 40% 60% 80% 6.2 7.5 9.8 15.0 14.0 15.0 17.0 20.0 24.0 What is the firm's optimal capital structure? (Hint: Complete the following table. When done, identified the optimal capital structure.) Proportion Proportion Corporate of Debt After-Tax Cost of Debt (%) of Equity Cost of Equity (%) Cost of Capital 0% 14.0 20% 6.2 15.0 40% 7.5 17.0 60% 9.8 20.0 80% 15.0 24.0 O

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