a. If Aspeon's business risk were higher than originally estimated, the firm would be more exposed to financial distress. Because of increased risk, investors and creditors would require higher rates of return. ka and ks would be higher at each debt level resulting to an optimal structure that uses less debt. In the case, we see that the optimal capital structure would be at the debt level of $75M (45% debt). (Table 7.1) b. Conversely, if the firm's business risk were lower than originally estimated, the capital costs would decrease. This would result to an optimal structure that used more debt. The firm's optimal capital structure would call for $125,000,000 of debt (78%). (Table 7.2)