Gemini Inc. is trying to determine its optimal capital structure. The company's capital structure consists of debt and common stock. In order to estimate the cost of debt, the company has produced the following table:

The company uses the CAPM to estiate its cost of common equity, rs the risk-free rate is 6% and the market risk premium is 9%. Gemini estimates that if it had no debt its beta would be 1.2

23 . Gemini Inc . is trying to determine its optimal capital structure . The company's capital structure consists of debt and common stock . In order to estimate the cost of debt , the company has produced the following table: Percent financed Percent financed Debt - to- equity ratio ( D / S ) Bond Before-tax cost with debt ( Wal ) with equity ( We ) rating of debt 0. 10 0. 90 0. 1010. 90 = 0. 1 1 AAA 5. 0%0 0. 15 0. 85 0 . 15/ 0.85 = 0. 18 AA 5.4%0 0. 20 0. 80 0 . 20 / 0.80 = 0. 25 A 6.0% 0 . 25 0. 75 0. 25/ 0.75 = 0. 33 BBB 7. 1% 0. 30 0. 70 0 . 30 / 0.70 = 0. 43 BB 8.8% The company uses the CAP'N to estimate its cost of common equity , Is . The risk- free rate is 6% and the market risk premium is 9% . Gemini estimates that if it had no debt its beta would be 1 . 2. ( Its " unlevered beta , " bu , equals 1. 2. ) The company's tax rate , I , is 35%. On the basis of this information , what is the company's optimal capital structure , and what is the firm's cost of capital at this optimal capital structure ? A. B . C. D. Equity = 90 % Equity = 85% Equity = 80% Equity = 75% Debt = 10%0 Debt = 15% Debt = 20% Debt = 25% WACC = 15.58%| WACC = 15. 43 %| WACC = 15. 63% WACC = 15.51 %