ABC has $5 billion in debt outstanding (carrying an interest rate of 9%), and 10 million shares trading at $50 per share. Based on its current EBIT of $ 200 million, its optimal debt ratio is only 30%. The firm has a beta of 1.20, and the current T-bond rate is 7%.Assuming that the operating income will increase 10% a year for the next five years and that the firm's depreciation and capital expenditures both amount to $ 100 million annually for each of the five years, estimate the debt ratio for ABC if

a. It maintains its existing policy of paying $50 million a year in dividends for the next 5 years.

b. It eliminates dividends.