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%	$45,000	160,000	10.0%
15	$43,000	112,000	10.3%
30	$37,000	90,000	11.4%
45	$33,000	80,000	13.0%
60	$20,000	64,000	18.0%

a.

0%, because the share price is maximised.

b.

30%, because the share price is maximised.

c.

15%, because the share price is maximised.

d.

45%, because EPS is maximised.

e.

60%, because EPS is maximised.