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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