Question: Question 6 (1 point) Based on the information below for Benson Corporation, what is the optimal capital structure and what is the cost of capital

 Question 6 (1 point) Based on the information below for Benson

Question 6 (1 point) Based on the information below for Benson Corporation, what is the optimal capital structure and what is the cost of capital under the optimal capital structure? 0.8 W(d) 0 0.2 0.4 0.6 r(d) 6% 7% 8% 9% 10% Benson uses the CAPM to estimate its cost of common equity, rs, and at the time of the analysis the risk-free rate is 5%, the market risk premium is 6%, and the company's tax rate is 40%. Benson estimates that its beta now (which is "unlevered" because it currently has no debt) is 0.8. 1) WACC=8.89%, Debt= 60%, Equity= 40% 2) WACC-9.06%, Debt= 80%, Equity= 20% 3) WACC-9.26% Debt= 20%, Equity= 80% 8: 4) WACC=8.95%, Debt= 40%, Equity= 60% 5) WACC=9.80%, Debt= 0%, Equity 100%

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