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Use the information in the following table to make a suggestion concerning the proportion of debt that the firm should utilize in its capital structure.

Use the information in the following table to make a suggestion concerning the proportion of debt that the firm should utilize in its capital structure. Benefit or (cost) No debt 25% debt 50% debt 75% debt Tax shield $0 $8 $18 $28 Agency cost -$12 -$3 -$3 -$12 Financial distress cost -$3 -$1 -$6 -$16 The firm can maximize firm value by choosing a select an option debt capital structure.

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