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Richmond Clinic has obtained the following estimates for its costs of debt and equity at various capital structures: Percent debt After-tax Cost of Debt Cost
Richmond Clinic has obtained the following estimates for its costs of debt and equity at various capital structures: Percent debt After-tax Cost of Debt Cost of equity 0% ___ 16% 20 6.6% 17.0 40 7.8 19.0 60 10.2 22.0 80 14.0 27.0 What is the firm's optimal capital structure? (Hint: Calculate its corporate cost of capital at each structure. Also, note that data on component costs at alternative capital structures are not reliable in real-world situations.
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