$1.$ Discuss Hill$$s financial position in $2011$ using ratios and competitors.

$2.$ Provide $3$ reasons why Hill should add debt to its capital structure and justify$/$prove using data and calculations. Pay special attention to the effect on WACC $($and share price$),$ the tax implications and the $2011$ economic situation $($interest rates, growth, etc.$).$ Use CAPM and the following data for WACC calculations: Rf $=1\mathrm{.}8\%,$ unlevered beta $=0\mathrm{.}5,$ MRP $=5\mathrm{.}5\%,$ tax rate $=35\mathrm{.}5\%.$ RD can be computed by interest$/$debt from exhibit $4.$

$3.$ Hill Country Snack Foods did not use debt until now. Discuss the possible reasons $($qualitative$).$

$4.$ How much debt should Hill add? Calculate the optimal debt ratio $($table and chart pls$!).$ As you know, the cost of debt rises with the D$/$A $($or D$/$Capital$)$ ratio because of the possibility of financial distress. Use CAPM for RE $($Rf $=1\mathrm{.}8\%,$ unlevered beta $=0\mathrm{.}5,$ MRP $=5\mathrm{.}5\%)$ Use the following values for RD and don$$t forget the tax shield in your calculations $[*(1-$T$)]$:

D$/$A $0\%10\%20\%30\%40\%50\%60\%70\%80\%90\%$

RD N$/$A $0\mathrm{.}0150\mathrm{.}020\mathrm{.}030\mathrm{.}040\mathrm{.}0550\mathrm{.}070\mathrm{.}090\mathrm{.}120\mathrm{.}16$

$5.$ Recommend a capital structure for Hill and justify. Consider the corporate culture before you just offer data and numbers!