Question3 Pak Pvt. Limited is examining its capital structure to arrive at an optimal debt ratio (debt ratio - dehu/(debt equity). It currently has no debt, one million shares outstanding trading at $2 Risk-free rate is 10% and your research indicates the following credit ratings at different debt levels 0 per share, equity beta of 1 ,5, and tax rate of 40%. Debt RatidRatin Kd e Ratid Ratin Kd 10% 10.50% 11% 12% 13% 14% 16% 18% 20% 25% 50%) 0% AAA 10%AA 30%)BBB 40%)BB 70%)CC 80%| C 90%|D Kd is the required rate of return on debt for a given credit rating (a) What is the firm's optimal debt ratio? (15) (b) Assuming the firm restructures to optimal debt ratio by issuing debt and repurchasing shares, what will be the estimated market value per share afier restructuring? Question3 Pak Pvt. Limited is examining its capital structure to arrive at an optimal debt ratio (debt ratio - dehu/(debt equity). It currently has no debt, one million shares outstanding trading at $2 Risk-free rate is 10% and your research indicates the following credit ratings at different debt levels 0 per share, equity beta of 1 ,5, and tax rate of 40%. Debt RatidRatin Kd e Ratid Ratin Kd 10% 10.50% 11% 12% 13% 14% 16% 18% 20% 25% 50%) 0% AAA 10%AA 30%)BBB 40%)BB 70%)CC 80%| C 90%|D Kd is the required rate of return on debt for a given credit rating (a) What is the firm's optimal debt ratio? (15) (b) Assuming the firm restructures to optimal debt ratio by issuing debt and repurchasing shares, what will be the estimated market value per share afier restructuring