1. Red World generates EBIT of 200 million. It currently does not have debt in the capital structure, but it is considering the use of debt and exploring raising either 700 million or 1,500 million. Interest on debt is payable at the rate of 6%. Ignoring taxation and bankruptcy costs and assuming all earnings after interest are paid to shareholders as dividends, which is the most attractive capital structure for Red World? Explain (maximum 250 words).