GreenTrees Corporation currently has $60 million in liabilities and common equity in combination. There are no preferred stock. The CFO constructed the following table to show the effect of changing the firm's capital structure:
|
Amount of Debt in the Capital Structure ($)
|
Earnings per Share(EPS) ($)
|
Market Price per Share (Po) ($)
|
|
20,000,000
|
5.0
|
125.5
|
|
30,000,000
|
5.5
|
130.75
|
|
40,000,000
|
5.7
|
130
|
Using this information, what is GreenTrees optimal capital structure? Explain your answer