Determine the firms optimal capital structure. construct a, Ask an Expert

Finance

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.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M942114

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