Risk Free rate =	2%
Market return =	10%
Beta of the unleveraged firm, bu =	0.9
Tax rate, T =	35%
Number of shares (initial), millions	10
Current Free cash flow, millions	$20
Growth rate	4%
The company has no Short-term investments or preferred stock.
Compute the WACC and stock price for each level of debt and determine the optimal level of debt.
Wd	0%	20%	30%	40%	50%	60%
Rd	0%	4%	5%	5.50%	6%	7%
Ws	100%	80%	70%	60%	50%	40%
b	0.9
Rs
WACC
Vop
Debt
Equity
N	10
Stock price, P