Pro Forma 2011 Financial Information for Alternative Capital Structures		Pro Forma 2011 for
(in million except for per share data and financial ratios)	Actual	20%	40%	60%
	2011	Debt-to-Capital	Debt-to-Capital	Debt-to-Capital
Sales	$1,364.6	$1,364.6	$1,364.6	$1,364.6
Operating income (EBIT)	$151.3	$151.3	$151.3	$151.3
Interest Expense	$0.0	$4.1	$12.8	$33.5
Income before income taxes	$151.3	$147.2	$138.5	$117.8
Income taxes	$53.7	$52.3	$49.2	$41.8
Net income	$97.6	$94.9	$89.3	$76.0
Dividends paid to common stockholders	$28.8	$28.5	$26.8	$22.8
Common shares outstanding	33,883,400	29,709,777	26,983,400	24,476,604
Earnings per share	$2.88	$3.19	$3.31	$3.11
Dividends per share	$0.85	$0.96	$0.99	$0.93
Interest coverage ratio (times)	n/a	36.90	11.82	4.52
Debt	$0.0	$145.0	$290.0	$435.0
Owners equity (book value)	$780.1	$580.1	$435.1	$290.1

(A) How much financial risk would the company face at each of the three-alternative debt-to-capital ratios presented in the exhibit below. (PLEASE INCLUDE FORMULAS USED TO SOLVE PROBLEM)

(B) How much value could Hill Country create for its shareholders at each of the three alternative debt levels? (PLEASE INCLUDE FORMULAS USED TO SOLVE PROBLEM)

(C) What debt-to-capital structure would you recommend as optimal for Hill Country Snack Foods? Why?