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Ub inc is examining its capital structure with the intent

Question: UB Inc. is examining its capital structure, with the intent of arriving at an optimal debt ratio. It currently has no debt and has a beta of 1.5. The riskless interest rate is 9%. Your research indicates that the debt rating will be as follows at different debt levels:

The firm currently has 1 million shares outstanding at $ 20 per share (tax rate = 40%).

a. What is the firm's optimal debt ratio?

b. Assuming that the firm restructures by repurchasing stock with debt, what will the value of the stock be after the restructuring?

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