An investment banking firm has estimated the following after-tax cost of debt and cost of equity for Marquez Luxury Travel Tours.
Proportion of Debt After-tax Cost of Debt Cost of Equity
30% 3.5% 10.5%
40% 3.8% 11.3%
50% 5.0% 12.9%
60% 7.2% 14.5%
What is the cost of capital at Marquez’ optimal capital structure given the above information?
8.95%
8.40%
8.30%
8.15%