... item in the optimal capital structure by its weighted representation in the overall capital structure and summing up the results to discover the best methods of financing capital. This method helps to achieve a balance of business risk and financial risk. III. Application of Financial Framework: By using a weighted average with CCI, we can determine an acceptable balance of equity financing and debt financing that would bring about an optimal balance between business risk and financial risk. We can calculate WACC with the following formula: WACC = %D (kd)(1-T) + %Ce (kce) = (% debt)(After-tax cost of debt) + (% Common Equity)(Cost of common Equity) = (% debt)(6 %) + (% Common Equity)(9%) The after-tax cost of debt and the cost of common equity were both provided in the case. In order to complete the numbers for the percent of debt and the percent of common equity to be used as a portion of financing ...

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