Biotec has estimated the costs of debt and equity capital for various proportion

ID: 2702865 • Letter: B

Question

Biotec has estimated the costs of debt and equity capital for various proportions of debt in its capital structure: Based on these estimates, determine Biotec's optimal capital structure.
% of Debt Cost of Debt Cost of Equity
35 5.4% 13.8%
40 5.6 14.0
45 5.9 14.3
50 6.4 14.7
- 45% debt
- 35% debt
- 50% debt
- 40% debt