Thompson & Thomson is an all equity firm that pays no taxes. The firm has 500,000 shares of stock outstanding, which are currently worth $40 per share. The company is considering a restructuring plan that would involve issuing $8 million of debt at 9% interest. The borrowed money would be used to repurchase equity. What will be the firm's new debt-to-equity ratio after this restructuring?

2/3

1/2

2/5