The Alpha Company plans to establish a subsidiary in Greece to manufacture and sell fashion wristwatches . Alpha has total assets of $ 70 million , of which $ 45 million is equity financed . The remainder is financed with debt . Alpha considered its current capital structure optimal . The construction cost of the Greek facility in drachmas is estimated at Dr1,200,000,000, of which Dr900,000,000 is to be financed at a below - market borrowing rate arranged by the Greek government . Alpha wonders what amount of debt it should use in calculating the tax shields on interest payments in its capital budgeting analysis . Can you offer assistance?