What is the firm optimal capital structure

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Reference no: EM131940099

Topic: Capital Structure Question

Richmond Clinic has obtained the following estimates for its costs of debt and equity at various capital structures:

Percent Debt

After-Tax Cost of Debt

Cost of Equity

0%

-

16%

20

6.6%

17

40

7.8

19

60

10.2

22

80

14.0

27

What is the firm's optimal capital structure? (Hint: Calculate its corporate cost of capital at each structure. Also, note that data on component costs at alternative capital structure are not reliable in real world situations.)

Reference no: EM131940099

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