You currently own 800 shares of JKL, Inc. JKL is currently an all equity that has 300,000 shares of stock outstanding at a market price of $40 a share. The company's earnings before interest and taxes are $2,400,000.

JKL recently decided to issue $1,200,000 of debt at 6 percent interest. This debt will be used to repurchase shares of stock.Ignore taxes and answer the following two questions:

Part A:What is JKL's target debt to asset ratio?

%

Part B:How many shares of JKL stock must you sell to undo the leverage? Assume thatyou can loan out those funds at 6 percent interest.