Washington Paper Company has estimated the costs of debt and equity capital (with bankruptcy and agency costs) for various proportions of debt in its capital structure as follows The firms marginal (and average) income tax rate is 40 percent Determine the companys optimal capitalstructure Cost of C...

Debt Ratio Pretax cost of debt Cost of equity Weig ...

Washington Paper Company has estimated the costs of debt and equity capital (with bankruptcy and agency costs)

Question:

Washington Paper Company has estimated the costs of debt and equity capital (with bankruptcy and agency costs) for various proportions of debt in its as follows:

The firm€™s marginal (and average) income tax rate is 40 percent.
Determine the company€™s optimal capitalstructure.

Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a...