Question $18$

A firm is analyzing two possible capital structures$[130$ and $50$ percent debt ratios. The firm has total assets of $$5,000,000$ and common stock valued at $$50$ per share. The firm has a marginal tax rate of $40$ percent on ordinary income. The number of common shares outstanding for each of the capital structures would be

$30$ percent debt ratio: $70,000$ shares and $50$ percent debt ratio: $50,000$ shares.

$30$ percent debt ratio: $50,000$ shares and $50$ percent debt ratio: $70,000$ shares.

$30$ percent debt ratio: $30,000$ shares and $50$ percent debt ratio: $50,000$ shares.

$30$ percent debt ratio: $70,000$ shares and $50$ percent debt ratio: $100,000$ shares.