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The Scanlon company's optimal capital structure calls for 50% debt and 50% common equity.
The Scanlon company’s optimal capital structure calls for 50% debt and 50% common equity. The interest rate on its debt, rd is a constant 10%, its cost of common equity from retained earnings, rs, is 14%; the cost of equity from new stock re, is 16%; and its marginal tax rate is 40%. Scanlon has the following investment opportunities.Project A: