• If your firm’s actual debt ratio is different from its “recommended” debt ratio, how should they get from the actual to the optimal? In particular, o should they alter their existing mix (by

• If your firm’s actual debt ratio is different from its “recommended” debt ratio, how should they get from the actual to the optimal? In particular,

o should they alter their existing mix (by buying back stock or retiring debt) or should they take new projects with debt or equity?