Question
A firm wants to create a weighted average cost of capital (WACC) of 16 percent. The firm's cost of equity is 18.8 percent and its
A firm wants to create a weighted average cost of capital (WACC) of 16 percent. The firm's cost of equity is 18.8 percent and its pre-tax cost of debt is 6.0 percent. The tax rate is 20 percent. What does the debt-equity ratio (D/E) need to be for the firm to achieve its target WACC?
A. 0.67
B. 0.33
C. 0.25
D. 0.75
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
The Changing Geography Of Banking And Finance
Authors: Pietro Alessandrini ,Michele Fratianni ,Alberto Zazzaro
1st Edition
1441947205, 978-1441947208
