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Ramdeen's Restaurant has estimated the following cost of debt (before- tax) and cost of equity. What is Ramdeen's Restaurant's optimal capital structure assuming a 40
Ramdeen's Restaurant has estimated the following cost of debt (before- tax) and cost of equity. What is Ramdeen's Restaurant's optimal capital structure assuming a 40 percent effective tax rate? Proposition of debt Before-tax cost of debt Cost of equity 0% 11.2% 10% 7,0% 11.1% 20% 7,1% 11.3% 30% 7.3% 11.9% 40% 7.7% 12.7% 50% 8.4% 13.7% 60% 9.5% 14.9% 70% 10.9% 17.7% A. 30% debt and 70% equity financing B. 40% debt and 60% equity financing C. 50% debt and 50% equity financing D. 60% debt and 40% equity financing
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