Use the following information to answer the next TWO questions.

The XXX Company has a marginal tax rate of 40%.

The company can issue new bonds at par that would provide a 8.5% YTM.

The firms beta is 0.7, the T-bill rate is 5%, and the market return is 12%.

The firms long-term debt currently sells at par value for $3,000.

The firm has 100 shares of common stock outstanding that sell for $10 per share.

What is XXXs capital structure based on market weights?

Select one:

a. 50% in debt, 50% in equity.

b. 75% in debt, 25% in equity.

c. 40% in debt, 60% in equity.

d. 30% in debt, 70% in equity.

e. 60% in debt, 40% in equity.