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Category > Business & Finance Posted 03 Jun 2017 My Price 11.00

XYZ inc. is setting its target capital structure.

XYZ inc. is setting its target capital structure. The CFO of XYZ Inc. believes that the optimal debt-to-capital ratio is between 25 percent and 60 percent. Her staff derived following the projections. Various debt levels were considered.

Debt/Capital Ratio Projected EPS Projected Stock Price
Dept/Capital Ratio Projected EPS Projected Stock Price
25% $4.20 $40.00
35% $4.45 $41.50
45% $4.75 $41.25
60% $4.50 $40.59

Assuming that the firm uses only debt and common equity, what is XYZ's optimal capital structure? At what debt-to-capital ratio is the company's WACC minimized?

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Status NEW Posted 03 Jun 2017 11:06 AM My Price 11.00

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