16. Capital Structure. Here is a simplified balance sheet for Epicure Pizza (figures in

$ millions):

Assets Liabilities and Shareholders Equity

Current assets $ 80 Current liabilities $ 60

Fixed assets 125 Long-term debt 65

Equity 80

Total $205 Total $205

Note: There are 16 million shares outstanding.

Epicure shares are currently priced at $12 each. (LO13-3)

a. You wish to calculate Epicures WACC. What is the relevant figure for the companys debt

ratio?

b. You now realize that since Epicure issued its debt, interest rates have fallen substantially.

Do you need to revise your measure of the debt ratio upward or downward?