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Reacher Technology has consulted with investment bankers and determined the interest rate it would pay for different capital structures, as shown below. Data for the
Reacher Technology has consulted with investment bankers and determined the interest rate it would pay for
different capital structures, as shown below. Data for the riskfree rate, the market risk premium, an estimate of
Reacher's unlevered beta, and the tax rate are also shown below. Based on this information, what is the firm's
optimal capital structure and what is the weighted average cost of capital at the optimal structure?
Additional: using the hypothetical free cash flow stream below, calcuate and graph
Fill in formulas in the yellow cells to find the optimum capital structure.
Additional: Similar to Figure pg graph the Cost of Capital for the AT Cost of Debt, Cost of Equity, and
WACC all on axis vs the DebtValue Ratio axis in the space below:
Hint: holding the CTRL button, highlight the four columns no labels of data above; click the insert tab; choose a scatter diagram with data points connected by lines Please fill out the highlighted NVP boxes on the right
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