This preview shows page 1. Sign up to view the full content.
Unformatted text preview: b = b U [1 + (1 – T)(D/E)]. b These r s estimates were calculated using the CAPM, r s = r RF + (r M – r RF )b. c These WACC estimates were calculated with the following equation: WACC = w d (r d )(1 – T) + (w ce )(r s ). The firm’s optimal capital structure is that capital structure which minimizes the firm’s WACC. Elliott’s WACC is minimized at a capital structure consisting of 40% debt and 60% equity. At that capital structure, the firm’s WACC is 11.45%....
View Full Document
This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.
- Spring '08