Problem:
Shook industries' capital structure consists of debt and equity only without any preferred stock. It can issue debt at 11% and its common stock is currently pays a dividend of $2/share (D0= $2). Current stock price is $24.75 and dividend is expected to grow at 7%. Tax rate is 35% and its WACC is 13.95%.
Required:
Question: What percentage of company's capital structure is debt?
Note: Please provide reasons to support your answer.