In early July $2019,$ the financial team at Grilled Delights, led by Chief Financial Officer Emma, was compiling the preliminary results for the seco $1$ quarter of $2019.$ Despite industry challenges of rising commodity, labor, and energy costs, Grilled Debelits was about to announce near$-$record quarterly profits of over $$10$ million, driven by strong revenue growth with comparable restaurant sales up over $8\%.$ Thecompany's performance stood corpo declining casual dining firms, even though Grilled In's share price had experienced to a current value of $$30\mathrm{.}00$ This prompties this the management teams the play of repurchasing company shares, thou excess cash. Despite historically avoiding of leveraging equity to capitalize on avail move would necessitats detit financing t to maintain a robust balance sheet, there was coration borrowings and potentially mitigate corporate m Tisbilities, all while preserving the ability to fund the company's growth initiatives.

Grilled Delight's financial position reflected a book equity of approximately $$350$ million and & mariat capitalization of $5900$ million, with recent adjustments made for a $50\%$ stock dividend. Despite t leveraging financial structures in the past, the management team recognized the potential advantages of judiciously employing debt financing, particularly amidst rising interest rates. As discussions progressed. the company weighed the benefits of share purchases against the imperative of maintaining sufficient funding for ongoing expansion plans, emphasizing the need for a balanced approach that aligns with the overarching goal of fostering sustainable buances growth. Grilled Delight's have a line of credit of $ $150$ million to borrow at a cost of $7\mathrm{.}25\%.$ Other details and scenario are mentioned in the below Table

Grilled Delight's

Effect of Recapitalization Scenarios $($dollars in thousands$)$

Debt$/$Total Capitel

Interest rate

$10\%$

$7\mathrm{.}25\%$

$35\%$

$7\mathrm{.}25\%$

Tas rate

$35\%$

$40,000$

$5075$

$34925$

$12223\mathrm{.}75$

Earnings before income taxes and interest

$40000$

Imerest expense

$40,000$

Earnings before taxes

$1237\mathrm{.}5$

$37462\mathrm{.}5$

Income taxes

$4000$

$14\mathrm{.}000$

Net income

$13111\mathrm{.}87$

$26\mathrm{.}000$

$2435063$

$20\%$

$22701\mathrm{.}25$

Book value

$35,000$

$315,000$

$70,000$

$280,000$

Total capital

$350\mathrm{.}000$

$350,000$

$35$

a$)$ What role does debt play in affecting the and filem value of Geilled Delights? $(5$ M$)$

b$)$ What is the anticipated share price of led Dutlights under ench scenario and how many shares will Grilled Delights he likely to repe under each stenario? $(10$ M$)$

$43.$ What capital structury policy wouldyommand for Grilled Delights? $(5$ M$)$