What is the cost of capital at the optimal mix of debt and equity

Exhibit A: Yield to maturity on debt: 8.0% Market value of debt: $100 million Number of shares of common stock: 10 million Market price per share of common stock: $30 Cost of capital if all equity-financed: 10.3% Marginal tax rate: 35%

Exhibit B:

Debt-to-Total Capital Ratio	Cost of Debt	Cost of Equity
20%	8.1%	12.6%
30%	8.8%	13.4%
40%	9.5%	15.7%
50%	10.4%	16.0%