Compare and contrast different Methods for determining optimal capital structure.

Mr. Harris would likely recommend a debt level that is low enough to minimize the present value of financial distress costs, while Ms. Broske would recommend a debt level that minimizes the firm’s weighted average cost of capital. Based on the data provided, it appears that Ms. Broske would recommend a debt level of $6 million, as this is the point where the weighted average cost of capital is at its lowest. On the other hand, it is not explicitly stated what debt level Mr. Harris would recommend, but it would likely be lower than $6 million in order to minimize the present value of financial distress costs.

The main similarity between the approaches is that both aim to determine the optimal capital structure for the firm. However, the difference is in the method of determining the optimal structure. Mr. Harris uses the MM framework which focuses on minimizing the present value of financial distress costs, while Ms. Broske uses the WACC approach which focuses on minimizing the firm’s weighted average cost of capital. Both approaches have their own advantages and disadvantages, and the choice of which one to use depends on the specific situation and the information available. One approach is not necessarily right or wrong, but rather, the choice depends on the goals of the analysis and the data available.