Determine the firms optimal capital structure

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Reference no: EM13333035

A firm has established the following cost of debt and equity capital (withbankruptcy and agency costs) for various proportions of debit in its capital structures:

Proportions of Debt Cost of Debt Cost od Equity

0.00 ------ 10.0%

0.10 4.0% 10.1

0.20 4.2 10.3

0.30 4.4 10.8

0.40 4.8 11.4

0.50 5.5 12.5

0.60 6.6 14.5

0.07 8.0 18.0

Determine the firm's optimal capital structure, and what is the formula to find this out.

Reference no: EM13333035

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