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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

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
40 7.8 19
60 10.2 22
80 14.0 27

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. Can someone show me step by step how this problem is calculated. I have been using the formula: CCC=[Wdx R(Rd) x (1-T) + [Wex R(Re)] but I'm not sure that I am plugging the right numbers into the equation.

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