Suppose that Mr. Dubinski has obtained from Blaines banker the quotes (the one in the template, ignore the one provided in the case) for default spreads over 10-year Treasury bonds. What do these quotes imply about BKIs cost of debt at the various debt levels and credit ratings? Compute BKIs weighted average cost of capital at each of the indicated debt levels. What do your calculations imply about Blaines optimal capital structure?

INE KITCHENWARE Weighted Average Cost of Capital Part of Tn Exhibit 5: Computing Minimum WACC for Blaine over a Range of Canital Structures Use this table to calculate cost of debt at different debt rating. For example, cost of debt for AAA=10-year treasuary insterest + default spread for AAA