Complete the blank
Proportion of Debt Cost
Equity Cost of debt Cost of Capital BL
0.0 12.0% 0
0.10 12.1% 4.7%
0.20 12.5% 4.9%
0.30 13.0% 5.1%
0.40 13.9% 5.5%
0.50 15.0% 6.1%
0.60 17.0% 7.5%
Which is the optimal capital structure and why?
If the unleveraged beta of this company is 1.12, calculate the leveraged beta for each capital structure and explain why the betas behave like this.
ABCDEF1Proportion of debt Proportion of equityCost of debt Cost of equityWACCLeveraged beta20%100.00%0%12%12.00%1.12310%90.00%4.70%12.10%11.36%1.24A20%80.00%4.90%…
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