Assuming that the firm uses only debt and common equity

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Jackson Trucking Company is in the process of setting its target capital structure. The CFO believes the optimal debt-to-capital ratio is somewhere between 20% and 50%, and her staff has compiled the following projections for EPS and the stock price at various debt levels:

Debt/Capital Ratio Projected EPS Projected Stock Price

20% $3.30 $34.75
30 3.40 35.75
40 3.75 36.25
50 3.60 33.75

Assuming that the firm uses only debt and common equity, what is Jackson's optimal capital structure? Round your answers to two decimal places.
% debt
% equity

At what debt ratio is the company's WACC minimized? Round your answer to two decimal places.

Reference no: EM13596988

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