he J.J. Binks Company is an all-equity firm. It expects perpetual earnings before interest and taxes (EBIT) of $120 million per year. Its equity required return is 20%. The firm is subject to a 25% tax rate. a. Calculate the value of the un-levered J.J. Binks? b. The company considers leveraging to increase the firms value. With leveraging it will face bankruptcy possibility at a cost of $80 million in exactly one year (Assume a 20% discount rate). The company plans to issue debt and buy back shares with the proceeds. It considers the following debt issuance: $50m, $75m, $100m, 125m, 150m and 175m. These debt levels will introduce an increasing probability of financial distress of 5%, 10%, 20%, 30%, 50% and 70%, respectively. Evaluate the J.J. Binks optimal capital structure.