What is the rationale for determining the optimal capital structure for a corporation? What are the pros and cons of increasing levels of debt and equity in the capital structure that any financial manager needs to consider in arriving at this optimal capital structure?

B) Suppose company A has issued 10 million shares which are trading at GHS 50 each: 4 million preference shares at GHS 40 and 1,500 bonds atGHS 100,000 each.

i. What is this companys capital structure?

ii. How much must A generate annually to satisfy its 3 classes of investors if the coupon rate on the bonds is 20%, the dividend rate on the preference shares is 24% and equity holders require 30% on their investment? The companys tax rate is 30%.

C) What is the weighted average cost of capital of A