Famas Llamas has a WACC of 8.95 percent. The companys cost of equity is 10.4 percent, and

Question:

Fama’s Llamas has a WACC of 8.95 percent. The company’s cost of equity is 10.4 percent, and its pretax cost of debt is 5.3 percent. The tax rate is 21 percent. What is the company’s target debt-equity ratio?

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...

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