Based on the information below, what is the firm's optimal capital structure?
A. Debt = 40%; Equity = 60%; EPS = $2.95; Stock price = $26.50.
B. Debt = 50%; Equity = 50%; EPS = $3.05; Stock price = $28.90.
C. Debt = 60%; Equity = 40%; EPS = $3.18; Stock price = $31.20.
D. Debt = 80%; Equity = 20%; EPS = $3.42; Stock price = $30.40.
E. Debt = 70%; Equity = 30%; EPS = $3.31; Stock price = $30.00.
Answer: C
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