$1.$ Following the instructions in the discussion for this case, enter the following data for each lev$1.$ Following the instructions in the discussion for this case, enter the following data for each level of debt, including $0\%,20\%,40\%$ and $60\%$ leverage.

Debt$-$to$-$Capital Ratio

$0\%$

$20\%$

$40\%$

$60\%$

Earnings per share

Dividends per share

Book value per share

Return on assets

Return on equity

Interest coverage

Stock price at P$/$E ratio of $14\mathrm{.}47$

Break$-$even P$/$E ratio for stock price of $$41\mathrm{.}67$

Dividend yield at stock price of $$41\mathrm{.}67$

Price at dividend yield of $2\mathrm{.}04\%$

Present value of debt tax shield

Earnings available to security holders

Change from actual$*$

Cash payments to security holders

Change from actual$*$

Income Taxes

Change from actual$*$

Impact on net income from a $10\%$ reduction in EBIT

Impact on net income from a $20\%$ reduction in EBIT

Internal growth rate at $30\%$ payout ratio

$*$Change from actual$$ means the dollar difference between the $0\%$ debt scenario and each scenario with debt.

$2.$ How much business risk does Hill Country face? How much financial risk would the company face at each of the three alternative debt$-$to$-$capital ratios presented in case Exhibit $4?$ How much value could Hill Country create for its shareholders at each of the three alternative debt levels?

$3.$ What debt$-$to$-$capital structure would you recommend as optimal for Hill Country Snack

Foods? What are the advantages of adding debt to the capital structure? How would issuing debt impact the company$$s taxes and expected costs of financial distress? How would the financial markets react if the company increased its financial leverage?

$4.$ How could Hill Country implement a more aggressive capital structure? What methods could be used to increase debt and decrease equity?

$5.$ Considering Hill Country$$s corporate culture, what arguments could you use to persuade CEO Keener or his successor to adopt and implement your recommendation?el of debt, including $0\%,20\%,40\%$ and $60\%$ leverage.

Debt$-$to$-$Capital Ratio

$0\%$

$20\%$

$40\%$

$60\%$

Earnings per share

Dividends per share

Book value per share

Return on assets

Return on equity

Interest coverage

Stock price at P$/$E ratio of $14\mathrm{.}47$

Break$-$even P$/$E ratio for stock price of $$41\mathrm{.}67$

Dividend yield at stock price of $$41\mathrm{.}67$

Price at dividend yield of $2\mathrm{.}04\%$

Present value of debt tax shield

Earnings available to security holders

Change from actual$*$

Cash payments to security holders

Change from actual$*$

Income Taxes

Change from actual$*$

Impact on net income from a $10\%$ reduction in EBIT

Impact on net income from a $20\%$ reduction in EBIT

Internal growth rate at $30\%$ payout ratio

$*$Change from actual$$ means the dollar difference between the $0\%$ debt scenario and each scenario with debt.

$2.$ How much business risk does Hill Country face? How much financial risk would the company face at each of the three alternative debt$-$to$-$capital ratios presented in case Exhibit $4?$ How much value could Hill Country create for its shareholders at each of the three alternative debt levels?

$3.$ What debt$-$to$-$capital structure would you recommend as optimal for Hill Country Snack

Foods? What are the advantages of adding debt to the capital structure? How would issuing debt impact the company$$s taxes and expected costs of financial distress? How would the financial markets react if the company increased its financial leverage?

$4.$ How could Hill Country implement a more aggressive capital structure? What methods could be used to increase debt and decrease equity?

$5.$ Considering Hill Country$$s corporate culture, what arguments could you use to persuade CEO Keener or his successor to adopt and implement your recommendation?