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What is absolute optimal capital structure

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Problem - Absolute Corporation currently has $50 million in liabilities and common equity in combination. The firm has no preferred stock. After careful evaluation, the CFO constructed the following table to show the CEO the effect of changing the firm's capital structure:

Amount of Debt in the Capital Structure

Earnings per Share (EPS)

Market Price per Share (P0)

$10,000,000

$5.00

$125.50

20,000,000

5.50

130.75

30,000,000

5.70

130.00

Required - According to this information, what is Absolute's optimal capital structure? Explain your answer.

Reference no: EM132698745

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