Question 7 BCD Corp is examining its capital structure with the intent of arriving at an optimal debt ratio. It currently has no debt and has a beta of 1.2. The riskless interest rate is 10%. Market risk premium is 5%. Your research indicates that the debt rating will be as follows at different debt levels: DID + E) Rating Interest Rate 0% AAA 10% 10% AA 10.5% 20% A 11% 30% BBB 12% 40% BB 13% 50% B 14% 60% CCC 16% 70% CC 18% 80% 20% D 90% 25% The firm currently has 1 million shares outstanding at $20 per share (tax rate = 40%). a. What is the firm's optimal debt ratio? b. Assuming that the firm restructures by repurchasing stock with debt, what will the value of the stock be after the restructuring? (Assume a 5% growth rate in perpetuity)