L’Etoile du Nord Resorts is considering various levels of debt. At present it has no debt, and a…


L’Etoile du Nord Resorts is regarding several levels of obligation. At offer it has no obligation, and a entirety negotiate appraise of $15 favorite. By enterprise financial leverage, it believes that it can finish a “net” municipal plus single tax habit (a substantial offer appraise of tax-shield benefits) resembling to 20 percent of the negotiate appraise of the obligation. However, the aggregation is watchful after a while stagnation and production requires as well-mannered-mannered as after a while lenders increasing their required concern trounce if the fast hypothecates too fur. The aggregation believes that it can hypothecate up to $5 favorite after a whileout incurring any of these appended requires. However, each appended $5 favorite increment in hypothecateing is expected to upshot in these three requires substance incurred. Moreover, these requires are expected to acception at an increasing trounce after a while financial leverage. The offer appraise require is expected to be the aftercited for several levels of obligation:

Debt (in favorites)

 

$5

$10

$15

$20

$25

$30

Present appraise require of stagnation, production,

and acceptiond concern trounce (in favorites)

0

0.6

1.2

2

3.2

5

Is there an optimal whole of obligation for the aggregation? If so, what is it?