Review this situation: Transworid Consortium Corp. is trying to identify its optimal capital structure. Transworld Consortium Corp. has gathered the following financial information to help with the analysis. Which capital structure shown in the preceding table is Transworld Consortium Corp.'s optimal capital structure? Debt ratio =40%; equity ratio =60% Debt ratio =70%; equity ratio =30% Debt ratio =30%; equity ratio =70% Debt ratio =50%; equity ratio =50% Debt ratio =60%; equity ratio =40% Consider this case: Globex Corp. has a capital structure that consists of 35% debt and 65% equity. The firm's current beta is 1.15, but management wants to understand Globex Corp.'s market risk without the effect of leverage. If Globex Corp. has a 40% tax rate, what is its unlevered beta? 0.70 0.74 0.87 1.00 Now consider the case of another company: B.C. Robotics Inc. has a current capital structure of 30% debt and 70% equity. Its current before-tax cost of debt is 10%, and its tax rate is 40%. It currently has a levered beta of 1.15. The risk-free rate is 2.5%, and the risk premium on the market is 7.5%. B.C. Robotics Inc. is considering changing its capital structure to 60% debt and 40% equity. Increasing the firm's level of debt will cause its before-tax cost of debt to increase to 12%. Use the Hamada equation to unlever and relever the beta for the new level of debt. What will the firm's weighted average cost of capital (WACC) be if it makes this change in its capital structure? (Note: In calculating the company's cost of equity, you are to use the CAPM cost of equity equation.) The optimal capital structure is the one that Wacc and the firm's stock price. Higher debt levels the firm's risk. Consequently, higher levels of debt cause the firm's cost af equity to Axis Chemical Co. has found that its expected EPS is maximized at a debt ratio of 45%. Does this mean that Axis Chemical Co.'s optimal capital structure calls for 45% debt? Yes No