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Question
Biotec has estimated the costs of debt and equity capital for various proportions of debt in its capital structure:| % of Debt | Cost of Debt | Cost of Equity |
| 35 | 5.4% | 13.8% |
| 40 | 5.6 | 14.0 |
| 45 | 5.9 | 14.3 |
| 50 | 6.4 | 14.7 |
If Biotec pays a current dividend of $1.00 and expects dividends to grow at a constant rate of 7%, what is Biotec's stock price if it obtains its optimal capital structure?
a. $14.66
b. $30.40
c. $30.14
d. $29.40
Answer
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