Following three problems$$CurrentTotal assets$$3,000,000,000$Tax rate$25\%$Operating income $($EBIT$)$$$8,000,000,000$Debt ratio$0\%$Interest expense$$0$WACC$10\%$Net income$$480,000,000$M$/$B ratio$1\mathrm{.}00$Share price$$32\mathrm{.}00$EPS$$3\mathrm{.}20$Estimated growth rate$0\%$Dividend payout ratio$100\%$

After going through extensive analysis, the company has decided to target $30\%$ debt and $70\%$ equity based on market values.$$ This strategy is expected to increase the cost of equity to $13\%,$ assuming the pre$-$tax cost of debt $7\%.$

Do you agree with this target capital structure strategy as a more optimal capital structure?

Group of answer choices

Yes, the target strategy is more optimal.

No$,$ the target strategy is more optimal.