My Math Forum Optimal capital structure need help

 Economics Economics Forum - Financial Mathematics, Econometrics, Operations Research, Mathematical Finance, Computational Finance

 December 7th, 2012, 07:23 AM #1 Newbie   Joined: Dec 2012 Posts: 1 Thanks: 0 Optimal capital structure need help Company Y requires 10 million capital. The rate of interest on debt is 10% and the tax rate is 40%. What is the optimal percentage of debt, when the model stating the negative value of financial distress V = I*A*X^2 ( where I is the total amount of investment, A is a constant which in this case is 0,05 and X is the proportion of the investment financed through debt) applies? So the model V estimates the monetary impact of financial distress caused by high proportion of leverage used by a company. I'm not sure how to begin solving this. I tried making a formula for WACC and attempted to minimize it but didn't get a reasonable answer. Please help I'm clueless here

 Tags capital, optimal, structure

 Thread Tools Display Modes Linear Mode

 Similar Threads Thread Thread Starter Forum Replies Last Post itamaratento Algebra 1 February 6th, 2014 04:56 PM itamaratento Algebra 0 February 4th, 2014 06:20 AM grainne Algebra 8 September 25th, 2013 11:53 PM bearsfan092 Physics 2 January 23rd, 2010 01:16 PM Mr Sprouts Calculus 9 May 8th, 2007 06:23 AM

 Contact - Home - Forums - Cryptocurrency Forum - Top