Absolute Corporation currently has $60 million in liabilities and common equity in combination. The firm has no preferred stock. The CFO constructed the following table to show the CEO the effect of changing the firm's capital structure. Amount of Debt in the Capital Structure $18,000,000 Market Price per Share (Po) Earnings per Share (EPS) $5.00 5.70 $101.80 24,000,000 112.75 30,000,000 6.70 110.50 According to this information, what is Absolute's optimal capital structure? Explain your answer. Round your answer to the nearest whole number. The optimal capital structure contains % of debt because it -Select- -Select- has the lowest amount of debt in the capital structure provides the highest market price per share of stock provides the highest earnings per share

Absolute Corporation currently has $60 million in liabilities and common equity in combination. The firm has no preferred stock. The CFO constructed the following table to show the CEO the effect of changing the firm's capital structure. Amount of Debt in the Capital Structure $18,000,000 Market Price per Share (Po) Earnings per Share (EPS) $5.00 5.70 $101.80 24,000,000 112.75 30,000,000 6.70 110.50 According to this information, what is Absolute's optimal capital structure? Explain your answer. Round your answer to the nearest whole number. The optimal capital structure contains % of debt because it -Select- -Select- has the lowest amount of debt in the capital structure provides the highest market price per share of stock provides the highest earnings per share

Fundamentals of Financial Management, Concise Edition (MindTap Course List)

9th Edition

ISBN:9781305635937

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter10: The Cost Of Capital

Section: Chapter Questions

Problem 1DQ: As a first step, we need to estimate what percentage of MMMs capital comes from debt, preferred...

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