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What capital structure should management accept

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Feldspar Inc. is considering the capital structure for a new division. Management has been given the following cost information:

Debt/assets. kd(BT Cost of Debt). ke(Cost of Equity)

.30. 6%. 12%

.40. 6.25% 12.5%

.50 7% 13.2%

.60 8% 14.0%

.70 9.5% 16.5%

Based on this information, what capital structure (debt/asset ratio) should management accept? Assume the marginal tax rate is 30%

Reference no: EM132661687

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