Feldspar Inc

question 41

Multiple Choice

Feldspar Inc.is considering the capital structure for a new division.Management has been given the following cost information:

Based on this information, what capital structure (debt/asset ratio) should management accept? Assume the marginal tax rate is 40%.

• A)40% has lowest cost of capital
• B)50% has lowest cost of capital
• C)60% has lowest cost of capital
• D)70% has lowest cost of capital

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