Given below is the interest coverage ratio for each credit slab and the

corresponding spread over the risk$-$free rate. The risk free rate is $5\%$ for large

manufacturing firms.

Your firm's market value is Rs $50,000.$ Currently

the firm does not have any debt. Current EBITDA is

Rs$.5,000$ and depreciation is Rs$.2000.$ The firm

plans to buy back half of its shares $($pro rata $-$ at

market value$)$ by issuing debt worth Rs$.25,000.$

What will be the credit rating of the debt issue. If $B$

is considered as a risky rating, as a stock investor

what would your advice be to this firm about its

strategy to buy back its shares. If the buyback must

be implemented, what proportion of the shares

would you advise should be bought back?