Richmond Clinic has obtained the following estimates for its costs of debt and equity at various capital structures: After-Tax Percent Cost of Cost of Debt Debt Equity 0% 16% 20% 6.6% 17% 40% 7.8% 19% 60% 10.2% 22% 80% 14.0% 27% What is the firms optimal capital structure? Please provide your answers in the following format: xx% Note: no decimals required. What percent equity? 15% What percent debt? 40%

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Richmond Clinic has obtained the following estimates for its costs
of debt and equity at various capital structures:
After-Tax
Percent
Cost of
Cost of
Debt
Debt
Equity
0%
16%
20%
6.6%
17%
40%
7.8%
19%
60%
10.2%
22%
80%
14.0%
27%
What is the firms optimal capital structure? Please provide your
answers in the following format: xx% Note: no decimals
required.
What percent equity? 15%
What percent debt?
40%
Transcribed Image Text:Richmond Clinic has obtained the following estimates for its costs of debt and equity at various capital structures: After-Tax Percent Cost of Cost of Debt Debt Equity 0% 16% 20% 6.6% 17% 40% 7.8% 19% 60% 10.2% 22% 80% 14.0% 27% What is the firms optimal capital structure? Please provide your answers in the following format: xx% Note: no decimals required. What percent equity? 15% What percent debt? 40%
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