Use the following information:

Debt: $$72,000,000$ book value outstanding. The debt is trading at $92\%$ of book value. The yield to maturity is $8\%.$

Equity: $2,200,000$ shares selling at $$39$ per share. Assume the expected rate of return on Federated's stock is $17\%.$

Taxes: Federated's marginal tax rate is $T_c=0\mathrm{.}21.$

Suppose Federated Junkyards decides to move to a more conservative debt policy. A year later, its debt ratio is down to