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:

Debt Ratio [B/(B + E)]      Pretax Cost of Debt (kd) Cost of Equity (ke)

0.00                         -                        14.0%

0.10                         7.0%                       14.2

0.20                         7.2                         14.6

0.30                         7.6                         15.4

0.40                         8.2                         17.0

0.50                         9.0                         20.0

0.60                       10.0                         26.0

The firm's marginal (and average) income tax rate is 40 percent. Determine the company's optimal capital structure.