What is the weighted average cost of capital at the optimal

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Reference no: EM13263364

Reacher technology has consulted with investment bankers and determined the interest rate it would pay for different capital structures, as shown in the following table. Data for the risk-free rate, the market risk premium, an estimate of Reacher's unlevered beta and the tax rate are also shown. Based on this info, what is the firm's optimal capital structure, and what is the weighted average cost of capital at the optimal structure?

Before tax cost debt
6.0%
6.1
7.0
8.0
10.0
12.5
15.5
18.0
Input data
risk-free rate = 4.5%
market risk premium 5.5%
unlevered beta .8%
tax rate 40%

Reference no: EM13263364

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