John has estimated the required return for Apple Ltd at each level of debt. If the value of shares can be determined as the expected EPS/required return, then estimate the optimal debt ratio, and justify your answer.

Debt ratio	Net profit after tax	Number of shares outstanding	Required return
0%	$56,800	20,000	10%
15	$51,120	16,000	11%
30	$46,476	14,000	12%
45	$40,896	12,000	15%
60	$34,080	10,000	19%

a.

60%, because EPS is maximised.

b.

15%, because the share price is maximised.

c.

30%, because the share price is maximised.

d.

0%, because the share price is maximised.

e.

45%, because EPS is maximised.