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 Ratio Projected EPS Projected Stock 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.