2. Problem 13.02 (Optimal Capital Structure) eBook Terrell Trucking Company is in the process of setting its target capital structure. The CFO believes that the optimal debt-to-capital ratio is somewhere between 20% and 50%, and her staff has compiled the following projections for EPS and the stock price at various debt levels: Debt/Capital Ratio Projected EPS Projected Stock Price 20% $3.20 $33.50 30 3.40 37.50 40 3.75 37.25 50 3.60 33.75 Assuming that the firm uses only debt and common equity, what is Terrell's optimal capital structure? Choose from the options provided above. Round your answers to two decimal places. % debt % equity At what debt-to-capital ratio is the company's WACC minimized? Choose from the options provided above. Round your answer to two decimal places.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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2. Problem 13.02 (Optimal Capital Structure)
еВook
Terrell Trucking Company is in the process of setting its target capital structure. The CFO believes that the optimal debt-to-capital ratio is somewhere between 20% and 50%, and her staff has compiled the following projections for EPS and the stock price at
various debt levels:
Debt/Capital Ratio
Projected EPS
Projected Stock Price
20%
$3.20
$33.50
30
3.40
37.50
40
3.75
37.25
50
3.60
33.75
Assuming that the firm uses only debt and common equity, what is Terrell's optimal capital structure? Choose from the options provided above. Round your answers to two decimal places.
% debt
% equity
At what debt-to-capital ratio is the company's WACC minimized? Choose from the options provided above. Round your answer to two decimal places.
Transcribed Image Text:2. Problem 13.02 (Optimal Capital Structure) еВook Terrell Trucking Company is in the process of setting its target capital structure. The CFO believes that the optimal debt-to-capital ratio is somewhere between 20% and 50%, and her staff has compiled the following projections for EPS and the stock price at various debt levels: Debt/Capital Ratio Projected EPS Projected Stock Price 20% $3.20 $33.50 30 3.40 37.50 40 3.75 37.25 50 3.60 33.75 Assuming that the firm uses only debt and common equity, what is Terrell's optimal capital structure? Choose from the options provided above. Round your answers to two decimal places. % debt % equity At what debt-to-capital ratio is the company's WACC minimized? Choose from the options provided above. Round your answer to two decimal places.
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