The optimal debt-to-capital ratio is between 20% and 50%. Debt/capital ratio pro
ID: 2698856 • Letter: T
Question
The optimal debt-to-capital ratio is between 20% and 50%.
Debt/capital ratio projected EPS Projected Stock price
20% $3.20 $35.00
30 3.45 36.50
40 3.75 36.25
50 3.50 35.50
Assuming that the firm uses only debt and common equity, what is Jackson's optimal capital structure? At what debt to capital ratio is the company's WACC minimized?
Explanation / Answer
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