Question 1: Suppose taco bells equity is currently selling for $55 per share, with 4 million shares outstanding. Firm also has 7000 bonds outstanding, which are selling at 94 percent of par, what are the firms current capital structure weights?
Question 2: Suppose that taco Bell was considering an active change to their capital structure so as to have a D/E of .4. Which type of security (stocks or bonds) would they need to sell to accomplish this, and how much would they have to sell?