ou currently own 1,200 shares of JKL, Inc. JKL is currently an all equity that has 200,000 shares of stock outstanding at a market price of $20 a share. The company's earnings before interest and taxes are $800,000.

JKL recently decided to issue $1,000,000 of debt at 6 percent interest. This debt will be used to repurchase shares of stock. Ignore taxes and answer the following two questions:

Part A: What is JKL's target debt to asset ratio?

%

Part B: How many shares of JKL stock must you sell to undo the leverage? Assume that you can loan out those funds at 6 percent interest.