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(8) (5 points) ABC Inc. has a weighted average cost of capital (after-tax) of 10.3 percent. The risk-free rate is 5 percent and return on
(8) (5 points) ABC Inc. has a weighted average cost of capital (after-tax) of 10.3 percent. The risk-free rate is 5 percent and return on the market portfolio is 11 percent. Its pretax cost of debt is 7.5 percent. The tax rate is 21 percent. What is the companys target debt-equity ratio if the company has a beta of 1.5?
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