Debt to Capital Ratio Equity to Capital Debt to equity ratio

Beta
(wd) Ratio (wc) ( D/E)
0.00 100 0.00 1.2
0.20 0.80 0.25 1.3
0.40 0.60 0.67 1.4
0.60 0.40 1.50 1.5
0.80 0.20 4.00 16

Risk Free Rate 5%

Market Premium 6%
Tax rate 40%
Ebit 500,000
NOPAT 300,000

Required:
a. What is the firm’s optimal capital Structure and what would be its WACC at the optimal capital structure?

Based on the table, it means if you finance your investment and if you finance your debt to 60% and equity of 40% you will hav
and for the Weighted Average Cost of Capital its 9.92

b. What’s the Firms Value if it has a EBIT of $500,000?

The value of the firm is 3,024,193.55

 Before cost of debt
Cost of equity Wacc Value
(rd)
7.0 0.122 12.20 2,459,016.39
8.0 0.128 11.20 2,678,571.43
10.0 0.134 10.44 2,873,563.22
12.0 0.140 9.92 3,024,193.55
15.0 1.010 27.40 1,094,890.51

e optimal capital structure?

ebt to 60% and equity of 40% you will have your optimal structure.