A firm's current balance sheet is as follows: Assets $ 150 $ 15 $ 135 Debt Equity a. What is the firm's weighted-average cost of capital at various combinations of debt and equity, given the following information? Round your answers to one decimal place. Debt/Assets 0% After-Tax Cost of Debt 6% Cost of Equity Cost of Capital 13% % 10 6 13 % 20 6 13 % 30 7 14 % 40 15 % 50 9 16 % 60 11 17 % b. Construct a pro forma balance sheet that indicates the firm's optimal capital structure. Choose the best structure from the options analyzed in part a. Compare this balance sheet with the firm's current balance sheet. Round your answers to the nearest dollar. $ 150 Debt Assets Equity %24 %24

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Market Efficiency

Market efficiency refers to the market's ability to provide investors with all available information about investment options for buying and selling securities. Market efficiency reflects the true value of securities without undervaluing or overvaluing them. When the quality and quantity of information increase, the market becomes more efficient, allowing it to reduce arbitrage and obtain higher market returns from investment. In a well-functioning market, everyone receives all information completely and immediately at no cost. It opens up a plethora of opportunities for investors to access various investment options.