Review the information in the table below for Xenon Corporation. This information was prepared by an investment bank to estimate how changing the capital structure of Xenon would impact various metrics. Answer the following questions. What is the optimal capital structure for Xenon? Why is this optimal? Why does the cost of debt increase as more debt financing is used? Why does the WACC decease and then increase and Value per share increase and then decrease as the capital structure changes?

Debt Financing	Equity Financing	Cost of Debt	Earnings per Share	Return on Equity	WACC	Value per Share
0%	100%	3.0%	$2.00	10%	11.0%	$35.00
10%	90%	3.5%	$2.20	12%	10.0%	$38.50
20%	80%	4.2%	$2.50	15%	9.0%	$41.25
30%	70%	4.7%	$2.75	17%	8.5%	$43.00
40%	60%	5.3%	$3.00	19%	9.2%	$40.00
50%	50%	6.0%	$3.30	22%	10.5%	$37.00