I run a regression of debt ratios against an independent variable and arrive at the following:

Debt-to-Capital = 0.27 + .15(PPE/Assets). If Krent Foods has a PPE/Assets ratio of 30% (and other firms in the industry have a PPE/Assets ratio of 60%), what is the firms optimal debt ratio and why?

Group of answer choices

4.8% because of Agency Costs

31.5% because of Agency Costs

4.8% because of Income Stability

31.5% because of Income Stability

4.8% because of Few Inside Investors