Richmond Clinic has obtained the following estimates for its costs of debt and equity at various cap Show more 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 firms optimal capital structure? (Hint: Calculate its corporate cost of capital at each structure. Also note that data on component costs at alternative capital structures are not reliable in real-world situations. Can someone show me step by step how this problem is calculated. I have been using the formula: CCC=[Wdx R(Rd) x (1-T) + [Wex R(Re)] but Im not sure that I am plugging the right numbers into the equation. Show less
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