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Biotec Has Estimated the Costs of Debt and Equity Capital

Question 24

Multiple Choice

Biotec 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 (%) 355.413.8405.614.0455.914.3506.414.7\begin{array}{lll}\% \text { of Debt } & \text { Cost of Debt }(\%) &\text { Cost of Equity }(\%) \\35 & 5.4 & 13.8 \\40 & 5.6 & 14.0 \\45 & 5.9 & 14.3 \\50 & 6.4 & 14.7\end{array}
Based on these estimates, determine Biotec's optimal capital structure.


A) 35% debt
B) 40% debt
C) 45% debt
D) 50% debt

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