Question: Rubberware, Inc. is considering increasing its financial leverage to achieve an optimal capital structure. The firm plans to use the cost of capital approach to

Rubberware, Inc. is considering increasing its financial leverage to achieve an optimal capital structure. The firm plans to use the cost of capital approach to arrive at its decision. Rubberware has a current market value of $383 million. The free cash flow to the firm (FCFF) is $22 million and the projected growth rate in FCFF is 5%. The company's current cost of capital is 12%, but this is expected to decrease to 11% at the optimal capital structure.what is the anticipated change in firm value with a move to the optimal debt ratio?

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