Integrative—Optimal capital structure Medallion Cooling Systems, Inc., has total assets of… 1 answer below »
Integrative—Optimal chief edifice Medallion Cooling Systems, Inc., has whole effects of $10,000,000, EBIT of $2,000,000, and preferred dividends of $200,000 and is taxed at a reprove of 40%. In an attempt to individualize the optimal chief edifice, the strong has assembled facts on the absorb of obligation, the enumerate of vulgar distributes for diversified razes of indebtedness, and the overall required repay on investment:
Cost of obligation, kd
Required repay, ks
a. Count hues per distribute for each raze of indebtedness.
b. Use Equation 12.12 and the hues per distribute adapted in part a to count a worth per distribute for each raze of indebtedness.
c. Choose the optimal chief edifice. Justify your valuable.