(Answered)-GreenTrees Corporation currently has $60 million in liabilities - (2025 Updated Original AI-Free Solution

Question

GreenTrees Corporation currently has $60 million in liabilities and common equity in combination. There are no preferred stock. The CFO constructed the following table to show the effect of changing the firm?s capital structure:

Amount of Debt in the Capital Structure ($)	Earnings per Share(EPS) ($)	Market Price per Share (Po) ($)
20,000,000	5.0	125.5
30,000,000	5.5	130.75
40,000,000	5.7	130

Using this information, what is GreenTrees optimal capital structure? Explain your answer

An optimal capital structure is the best debt-to-equity ratio for a firm that maximizes its value. The
optimal capital structure for a company is one which offers a balance between the ideal...