Optimal Debt Ratios based upon Comparable Firms

The predicted debt ratio from the regression shown above will generally yield

(a) a debt ratio similar to the optimal debt ratio from the cost of capital approach

(b) a debt ratio higher than the optimal debt ratio from the cost of capital approach

(c) a debt ratio lower than the optimal debt ratio from the cost of capital approach

dbtreg.xls: There is a dataset on the web that summarizes the latest debt ratio regression across the entire market.

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