Simac Inc. is a publicly traded company and its current cost of capital is 10%....
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Finance
Simac Inc. is a publicly traded company and its current cost of capital is 10%. You have computed the optimal debt ratio for the firm to be 40% and the cost of capital at the optimal is 7%. If the firm is mature (with expected free cash flows growing 2% a year in perpetuity), how much will Simacs firm value increase by, on a percentage basis, if it moves to its optimal?
a.
22%
b.
17%
c.
7.5%
d.
60%
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