Assignment:
Jackson Trucking Company is in the process of setting its target capital structure. The CFO believes the optimal debt-to-capital ratio is somewhere between 20% and 50%, and her staff has compiled the following projections for EPS and the stock price at various debt levels:
Debt/Capital........................Projected.....................Projected Stock
Ratio...................................EPS.............................Price
20%..................................$3.30..............................$34.75
30%..................................$3.40..............................$35.75
40%..................................$3.75..............................$36.25
50%..................................$3.60..............................$33.75
Assuming that the firm uses only debt and common equity, what is Jackson's optimal capital structure? Round your answers to two decimal places.
______________% debt
______________% equity
At what debt ratio is the company's WACC minimized? Round your answer to two decimal places.