(Answered) What is the target debt to asset ratio

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You currently own 1100 shares of JKL, Inc. JKL is an all equity that has 200000 shares of stock outstanding at a market price of $10 a share. The company's earnings before interest and taxes are $400,000. JKL has decided to issue $1,000,000 million of debt at 10 percent interest. This debt will be used to repurchase shares of stock. Ignore taxes and answer the following two questions:

Required:

A) What is the target debt to asset ratio?

B) How many shares of JKL stock must you sell to undo the leverage if you can loan out funds at 10% interest?

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