UB is examining its capital structure with the intent of arriving at an optimal debt ratio. It currently has no debt and has a beta of 1.5. The riskless interest rate is 9%. Your research indicates that the debt rating will be as follows at different debt levels:

D/(D+E)(%)	Rating	Interest Rate
0	AAA	10
.10	AA	10.5
.20	A	11
.30	BBB	12
.40	BB	13
.50	B	14
.60	CCC	16
.70	CC	18
.80	C	20
.90	D	25

The firm currently has 1 million shares outstanding at $20 per share (tax rate=40%).

A. What is the optimal debt ratio?

B. Assuming that the firm restructures by repurchasing stock with debt, what will the value of the stock be after the restructuring? (with 5% growth in perpetuity)