Question: Ki (before tax) (%) Nil b. Given (i) the EBIT of Tk. 2,00,000, (ii) the corporate tax rate of 35 percent, and (iii) the

Ki (before tax) (%) Nil b. Given (i) the EBIT of Tk.

Ki (before tax) (%) Nil b. Given (i) the EBIT of Tk. 2,00,000, (ii) the corporate tax rate of 35 percent, and (iii) the following data, determine the amount of debt that should be used by the firm in its capital structure to maximize the value of the firm. Debt Nil 6 Ke (%) 12.0 TK1,00,000 10.0 12.0 2,00,000 10.5 12.6 3,00,000 11.0 13.0 4,00,000 12.0 13.6 5,00,000 14.0 15.6 6,00,000 17.0 20.0 C. In considering the most desirable capital structure of a company the following data have been collected by the finance manager of the company from the capital market: 5 Debt as % of Cost of debt total capital (In %) Cost of equity (In %) 0 5.0 SAP 12.0 10 5.0 12 1+0.18 20 5.0 12.5 30 5.5 13.0 40 6.0 14.0 50 6.5 16.0 60 7.0 20.0 You are required to determine the optimal debt-equity mix for the company by computing F the composite cost of capital. J

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