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PROBLEM SET ON OPTIMAL CAPITAL STRUCTURE ACB Inc. 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 1.4. T-Bond rate is 7.5%. Your research indicates that the debt rating will be as follows at different debt levels: Your research indicates that the debt rating will be as follows at different debt levels: D/(D+E) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Rating Interest rate AAA 9.5% AA 10% A 10.5% BBB 11.5% BB 12.5% B 13.5% CCC 15% CC 18% 20% D 25% The firm currently has 2 million shares outstanding at $20 per share, and the tax rate is 35%. Assume an equity market risk premium of 6%. What is the firm's optimal debt ratio