< Back to Assignment Attempts: Keep the Highest: /8 7. Determining the optimal capital structure Understanding the optimal capital structure Aa Aa = Review this situation: Transworld Consortium Corp. is trying to identify its optimal capital structure. Transworld Consortium Corp. has gathered the following financial information to help with the analysis. Debt Ratio Equity Ratio EPS DPS Stock Price 30% 70% 1.55 0.34 22.35 40% 60% 1.67 0.45 24.56 50% 50% 1.72 0.51 25.78 60% 40% 1.78 0.57 27.75 70% 30% 1.84 0.62 26.42 1 which capital structure shown in the preceding table is Transworld Consortium Corp.'s optimal capital structure? Debt ratio = 70%; equity ratio = 30% Debt ratio = 30%; equity ratio = 70% Debt ratio = 60%; equity ratio = 40% Debt ratio = 50%; equity ratio = 50% Debt ratio = 40%; equity ratio = 60% Consider this case: Globex Corp. is an all-equity firm, and it has a beta of 1. It is considering changing its capital structure to 60% equity and 40% debt. The firm's cost of debt will be 8%, and it will face a tax rate of 45%. 2 What will Globex Corp.'s beta be if it decides to make this change in its capital structure?