Question 20

Based on the information below for Western Corporation, what is the optimal capital structure?

A) Debt = 20%; Equity = 80%; EPS = $3.95; Equity value = $26.50

B) Debt = 30%; Equity = 70%; EPS = $3.65; Equity value = $28.50

C) Debt = 40%; Equity = 60%; EPS = $3.42; Equity value = $32.50

D) Debt = 50%; Equity = 50%; EPS = $3.31; Equity value = $30.00

E) Debt = 60%; Equity = 40%; EPS = $3.18; Equity value = $30.50