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What is optimal capital structure of company

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Reference no: EM132575103

Question : Rebecca Isbell Optical Corporation is trying to determine an appropriate capital structure. It knows that, as its financial leverage increases, its cost of borrowing will eventually increase as will the required rate of return on its common stock. The company has made the following estimates for various financial leverage ratios.

a. At a tax rate of 35 percent, what is the weighted average cost of capital of the company at various leverage ratios in the presence of bankruptcy costs?

b. Explain optimal capital structure? What is optimal capital structure of this company

Reference no: EM132575103

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