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Using the following information for Handy Hardware, determine the capital structure that results in the lowest weighted average cost of capital (WACC) for the firm.

Using the following information for Handy Hardware, determine the capital structure that results in the lowest weighted average cost of capital (WACC) for the firm. Explain your answer.

Proportion of Debt

Earnings Per Share

Stock Price P0

10%

$3.85

$95.40

30%

3.98

$97.25

50%

4.10

$96.80

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