Debt/Assets Equity/Assets Debt/Equity B-T Cost of RRatio (D/E) Dpebt (ka) RRatio (wa) RRatio (w.) 8.00% 00,25 0.67 08.2 00.8 00.6 1010.00% 0014 |f50 44.00 142.00% 115.00% 00:4 00.6 00.8 The company estimates that the risk-free rate is 5%, the market risk premium is 6%, and its tax rate is 40%. It estimates that if it had no debt, its beta, would be 1.2. Based on the information, what is the firm's optimal capital structure, and what would the WACC be at the optimal capital structure? 002 Wacc BL rs
Debt/Assets Equity/Assets Debt/Equity B-T Cost of RRatio (D/E) Dpebt (ka) RRatio (wa) RRatio (w.) 8.00% 00,25 0.67 08.2 00.8 00.6 1010.00% 0014 |f50 44.00 142.00% 115.00% 00:4 00.6 00.8 The company estimates that the risk-free rate is 5%, the market risk premium is 6%, and its tax rate is 40%. It estimates that if it had no debt, its beta, would be 1.2. Based on the information, what is the firm's optimal capital structure, and what would the WACC be at the optimal capital structure? 002 Wacc BL rs
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Q1. A Corporation is trying to determine its optimal capital structure using the following table.
The company estimates that the risk-free rate is 5%, the market risk premium is 6%, and its tax rate is 40%. It
estimates that if it had no debt, its beta, would be 1.2. Based on the information, what is the firm’s optimal capital
structure, and what would the WACC be at the optimal capital structure?
Transcribed Image Text:DIC.
Debt/Assets Equity/Assets Debt/Equity B-T Cost of
RRatio (D/E)
FRatio (wa)
RRatio (w.)
PDebt (ka)
8.00%
08,2
00.4
00.8
00.6
00.25
00.67
1010.00%
142.00%
1.f.50
44.00
00.6
00.4
15.00%
The company estimates that the risk-free rate is 5%, the market risk premium is 6%, and its tax rate is 40%. It
estimates that if it had no debt, its beta, would be 1.2. Based on the information, what is the firm's optimal capital
structure, and what would the WACC be at the optimal capital structure?
00.2
Wacc
BL
rs
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