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Seduak Has Estimated the Costs of Debt and Equity Capital

Question 25

Multiple Choice

Seduak has estimated the costs of debt and equity capital for various proportions of debt in its capital structure: % of Debt  Cost of Debt (%)  Cost of Equity (%) 0−13.0105.413.3205.413.8305.814.4406.315.2507.016.0608.217.0\begin{array}{rrr}\% \text { of Debt } & \text { Cost of Debt }(\%) &\text { Cost of Equity }(\%) \\0 & - & 13.0 \\10 & 5.4 & 13.3 \\20 & 5.4 & 13.8 \\30 & 5.8 & 14.4 \\40 & 6.3 & 15.2 \\50 & 7.0 & 16.0 \\60 & 8.2 & 17.0\end{array}
Based on these estimates, determine Seduak's optimal capital structure.


A) 30% debt
B) 40% debt
C) 50% debt
D) 60% debt

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