Kohinoor Mills Limited (KML) operates in the Textile goods sector. Kohinoor Mills Limited is a Pakistan-based company engaged in the textiles industry. Now the proprietor wants to restructure of their capitalization on large-scale, because Financial Leverage is an aspect of financial planning which enable 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 Kohinoor Mills Limited base on its equity finance, I am being hired as a financial analyst on contractual basis to evaluate the restructure of capitalization to inclusion debt portion of its amount of capital and find out the optimal capital structure of the company and the maximum firm value. KML financial highlights represent its total equity Rs 1,575,000 ( in thousands ), earnings before interest and tax Rs 315,000, portion of debt zero percent, portion of equity 100 percent, cost of equity 13 percent, weighted average cost of capital 13 percent on the basis of unlevered cost of equity, earning per share Rs 9.75, risk free rate 9 percent, market risk premium 5 percent, number of shares outstanding 21,000 (in thousand ), market price per share Rs 75, KMLs is a growth rate zero percent and pays out all of its earnings as dividend. KMLs tax rate is 35 percent. Quotations for before tax cost of debt from a local bank is given; KMLs can borrow unlimited amounts from a well-known financial institution ( Habib Metropolitan Bank ) at lowest interest rates, 10 percent of debt can borrow at cost of 7 percent, 20 percent of debt can borrow at cost of 9.5 percent, 30 percent of debt can borrow at cost of 11 percent, 40 percent of debt can borrow 14.5 percent, 50 percent of debt can borrow at cost of 17.3 percent and 60 percent of debt can borrow at cost of 19.5 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 Hamadas equation shows how increase in the debt / equity ratio increase beta. Kohinoor Mills Limited has unlevered beta 0.8 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.