Mimi Case Study for 7th edition of Ehrhardt, M. C., Brigham, E. F. Corporate Finance: A Focused Approach. [Chegg]. Retrieved from https://ereader.chegg.com/#/books/9781337910231/

This data goes with second question it was to large to add as one post , please see part 2 of the post for question I need answered

Hatfield Medical Supply: Balance Sheet (Millions of Dollars), December 31 Hatfield Medical Supply: Income Statement (Millions of Dollars Except per Share)

Reacher Technology has consulted with investment bankers and determined the interest rate it would pay for different capital structures, as shown below. Data for the risk-free rate, the market risk premium, an estimate of Reacher's unlevered beta, and the tax rate are also shown below. Based on this information, what is the firm's optimal capital structure and what is the weighted average cost of capital at the optimal structure?

Percent Financed with Debt (wd) Before-tax Cost Debt (rd) Input Data

Risk-free rate 4.5%

Market risk premium 5.5%

Unlevered beta 1.1

0% 6.0% Tax rate 25.0%

5% 6.1%

10% 6.3%

15% 6.7%

20% 10.0%

30% 12.5%

35% 15.5%

40% 18.0%

Fill in formulas in the yellow cells to find the optimum capital structure.

Debt/Value Equity/Value Debt/Equity A-T Cost of Levered Cost of

Ratio (wd) Ratio (ws) Ratio (wd/ws) Debt (rd) Beta Equity WACC

0% 1.0 0.00

5% 1.0 0.05

10% 0.9 0.11

15% 0.9 0.18

20% 0.8 0.25

30% 0.7 0.43

35% 0.7 0.54

40% 0.6 0.67

WACC at optimum debt ratio =

Optimum debt ratio =