Finding the Target Capital Structure Famas LIamas has a weighted average cost of capital of 10.2 percent.

Question:

Finding the Target Capital Structure Fama’s LIamas has a weighted average cost of capital of 10.2 percent. The company’s cost of equity is 14 percent, and its pretax cost of debt is 8.4 percent. The tax rate is 35 percent. What is the company’s target debt-equity ratio?

Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... Cost Of Debt
The cost of debt is the effective interest rate a company pays on its debts. It’s the cost of debt, such as bonds and loans, among others. The cost of debt often refers to before-tax cost of debt, which is the company's cost of debt before taking... Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the...