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The financial manager has determined the following schedules for the cost of funds:

Cost of debt ratio Cost of debt Equity

0% 5% 13%

10% 5% 13%

20% 5% 13%

30% 5% 13%

40% 5% 14%

50% 6% 15%

60% 8% 16%

a. Determine the firm's optimal capital structure.

b. Construct a simple pro formula balance sheet that shows the firms optimal combination of debt equity for its current level of assets.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M942114

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