Question: Use the information in the following table to make a suggestion concerning the proportion of debt that the firm should utilize in its capital structure.

Use the information in the following table to make a suggestion concerning the proportion of debt that the firm should utilize in its capital structure.

Benefit or (Cost) Tax shield Agency cost No Debt $ 0 -$10 25% Debt 50% Debt $10 -$ 5 -$ 3 $20 -$ 5 -$10 75% Debt $30 -$20 -$10 Financial distress cost-S 1

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