Please read the case and only answer parts a and b, just those two parts. Explain your reasoning. Thank you!

INTEGRATED CASE CAMPUS DELI INC OPTIMAL CAPITAL STRUCTURE Assume that you have just been hired as business manager of Campus Deli (CD, which is located adjacent to the campus. Sales were $1,100,000 last year, variable costs were 60% of sales, and fixed costs were $40,000. Therefore, EBIT totaled $400,000. Because the university's enrollment is capped, EBIT is expected to be constant over time. Because no expansion capital is required, CD distributes all earnings as dividends. Invested capital is $2 million, and 80,000 shares are outstanding. The management group owns about 50% of the stock, which is traded in the over-the-counter market. CD currently has no debt-it is an all-equity firm--and its 80,000 shares outstanding sell at a price of $25 per share, which is also the book value. The firm's federal-plus-state tax rate is 40% statements made in your finance text, you believe that CD's shareholders would be better off if some debt financing were used. When you suggested this to your new boss, she encouraged you to pursue the idea but to provide support for the suggestion