a) options are 7.6% , 6.7% , 10.5% , 9.5% b) maximizes , minimizes

c) maximize , minimize

d) increase , decrease

e) increase , decrease

Now consider the case of another company: U.S. Robotics Inc. has a current capital structure of 30% debt and 70% equity. Its current before-tax oost of debt is 6%, and its tax rate is 45%. It currently has a levered beta of 1.25. The risk-free rate is 2.5%, and the risk premium on the market is 8%. US. Robotics Inc. is considering changing its capital structure to 60% debt and 40% equity. Increasing the firm's level of debt will cause its before-tax cost of debt to increase to 8%. Use the Hamada equation to unlever and relever the beta for the new level of debt. What will the firm's weighted average cost of capital (WACC) be if it makes this change in its capital structure? Ci the firm's stock price. The optimal capital stru Higher debt levels is the one that the WACC and the firm's risk. Consequently, higher levels of debt cause the firm's cost of equity to Axis Chemical Co. has found that its expected EPS is maximized at a debt ratio of 45%. Does this mean that Axis Chemical Co.'s optimal capital structure calls for 45% debt? O Yes O No