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Debt ratio Pre-tax cost of debt Levered beta 10% 5.00% 0.90 20% 5.25% 0.95 30% 5.30%...

Debt ratio Pre-tax cost of debt Levered beta
10% 5.00% 0.90
20% 5.25% 0.95
30% 5.30% 1.10
40% 7.00% 2.00
50% 9.00% 4.00
60% 11.00% 8.00
Risk-free rate 1%
Market risk premium 9%
tax rate 35%

You've collected the above info about a firm. Use it to set up a capital structure table Find the WACC at each debt ratio and state which debt ratio is optimal.

excel work sheet Please

also show formula

Solutions

Expert Solution

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

jeff jeffy answered 1 year ago
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