Allock Petroleum Limited (APL) is one of four oil marketing companies in Pakistan to be granted a license (in February, 1998). Attock Petroleum is part of the Attock Group of Companies, which is the only fully integrated group in the oil & gas sector of Pakistan involved in exploration & production, refining & marketing. Now the proprietor wants to restructure of their capitalization on large-scale, because Financial Leverage is an aspect of financial planning which enables the company to enhance the return on equity shares by using debt with lower fixed cost which is less than the overall return on investment. Current financial highlights of APL base on its equity finance, you are being hired as a financial analyst on contractual basis to evaluate the restructure of capitalization to inclusion debt portion of its full amount of capital and find out the optimal capital structure of the company at maximization of total market value of company with minimum cost level. APL financial highlights represents its total assets Rs. 900,000 (in thousand), total equity Rs. 900,000 (in thousand), earnings before interest and tax Rs. 160,000, portion of debt zero percent, portion of equity 100 percent, return on equity 10.7 percent, weighted average cost of capital 10.7 percent on the basis of unlevered cost of equity, earning per share Rs. 9.6, risk free rate 7 percent, average market return 10.7 percent, number of shares outstanding 10,000 (in thousand), market price per share Rs. 90, APL's growth rate zero percent and pays out all of its earning as dividends. APL's tax rate is 40 percent. Quotations for after tax cost of debt from a well-known financial institution (Habib Metropolitan Bank) at lowest interest rates, 10 percent of debt can borrow at cost of 5.5 percent, 20 percent of debt can borrow at cost of 6.3 percent, 30 percent of debt can borrow at cost of 7.1 percent, 40 percent of debt can borrow at cost of 8.5 percent, 50 percent of debt can borrow at cost of 9.5 percent, 60 percent of debt con borrow at cost of 10.1 percent. An increase in the debt ratio also increase the risk faced by shareholders, and this has an effect on the cost of equity. This relationship is harder to quantify, but it can be estimated. The Hamada's equation shows how increase in the debt/equity ratio increase beta. APL has unlevered beta is 1 that is the beta it would have if it has no debt All earnings are paid out as dividends and growth rate remain zero percent. Required: 1. Calculate optimal capital structure (restructuring the financial structure) for APL as p international standards and the given information. 2. Interpret the best mix of debt and equity financing that maximizes a company's mare value while minimizing its cost of capital for APL.