Understanding the optimal capital structure Review this situation: Transworld Consortium Corp. is trying to identify its optimal capital structure. Transworld Consortium Corp. has gathered the following financial information to help with the analysis. Debt Ratio Equity Ratio EPS DPS Stock Price 30% 40% 50% 60% 70% 70% 1.25 0.55 36.25 60% 1.40 0.60 37.75 50% 1.60 0.65 39.50 40% 1.85 0.75 38.75 30% 1.75 0.70 38.25 Which capital structure shown in the preceding table is Transworld Consortium Corp.'s optimal capital structure? Debt ratio = 50%; equity ratio = 50% Debt ratio 30%; equity ratio = 70% O Debt ratio = 60%; equity ratio-40% O Debt rat: 70%; equity ratio = 30% Debt ratio = 40%; equity ratio-60% Consider this case: Globex Corp. is an all-equity firm, and it has a beta of 1 . It is considering changing its capital structure to 70% equit and 30% debt. The firm's cost of debt will be 8%, and it will face a tax rate of 35%. What will Globex Corp.'s beta be if it decides to make this change in its capital structure? Now consider the case of another company: U.S. Robotics Inc. has a current capital structure of 30% debt and 70% equity. Its current before-tax cost of debt is 8%, and its tax rate is 35%. It currently has a levered beta of 1.10. The risk-free rate is 3%, and the risk premium