Terrell Trucking Company is in the process of setting its target capital structure. The CFO believes that the optimal de
Posted: Sun Jul 03, 2022 12:52 pm
Terrell Trucking Company is in the process of setting its targetcapital structure. The CFO believes that the optimaldebt-to-capital ratio is somewhere between 20% and 50%, and herstaff has compiled the following projections for EPS and the stockprice at various debt levels:
Debt/Capital Ratio Projected EPS Projected Stock Price
20% $3.00 $34.75
30: 3.55 37.50
40: 3.70 36.75
50: 3.65 34.00
Assuming that the firm uses only debt and common equity, what isTerrell's optimal capital structure? Choose from the optionsprovided above. Round your answers to two decimal places.
% debt % equity
At what debt-to-capital ratio is the company's WACC minimized?Choose from the options provided above. Round your answer to twodecimal places.
%
Debt/Capital Ratio Projected EPS Projected Stock Price
20% $3.00 $34.75
30: 3.55 37.50
40: 3.70 36.75
50: 3.65 34.00
Assuming that the firm uses only debt and common equity, what isTerrell's optimal capital structure? Choose from the optionsprovided above. Round your answers to two decimal places.
% debt % equity
At what debt-to-capital ratio is the company's WACC minimized?Choose from the options provided above. Round your answer to twodecimal places.
%