FREE Trial
Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A firm wants to create a weighted average cost of capital (WACC) of 10.4 percent. The firm's cost of equity is 14.5 percent and its


A firm wants to create a weighted average cost of capital (WACC) of 10.4 percent. The firm's cost of equity is 14.5 percent and its pre-tax cost of debt is 8.5 percent. The tax rate is 34 percent. What does the debt-equity ratio need to be for the firm to achieve its target WACC?  

Step by Step Solution

There are 3 Steps involved in it

Step: 1

To calculate the debtequity ratio needed for the firm to achieve its target weighted average cost of ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Cost Management Measuring Monitoring And Motivating Performance

Cost Management Measuring Monitoring And Motivating Performance

Authors: Leslie G. Eldenburg, Susan Wolcott, Liang Hsuan Chen, Gail Cook

2nd Canadian Edition

1118168879, 9781118168875

More Books

Students also viewed these Finance questions

Question

★★★★★
Ann Carter, Chief Financial Officer of Consolidated Electric Company (Con El), must make a recommendation to Con Els board of directors regarding the firms dividend policy. Con El owns two...

Answered: 1 week ago

Question

★★★★★
The beta for the equity in Fullsome Corporation is 0.95. The market risk premium is 7 per cent, and the risk-free rate is 4 per cent. Fullsome has a target debt/equity ratio of 25 per cent. Its cost...

Answered: 1 week ago

Question

★★★★★
Sheehan Corp. is forecasting an EPS of $3.00 for the coming year on its 500,000 outstanding shares of stock. Its capital budget is forecasted at $800,000, and it is committed to maintaining a $2.00...

Answered: 1 week ago

Question

★★★★★
You are considering an investment that will be valued at $1,000 one year from now. Your next best alternative investment opportunity would yield an annual rate of return of 8%, In other words, if you...

Answered: 1 week ago

Question

★★★★★
Nellie Lumpkin, who suffered from various illnesses, including dementia, was admitted to the Picayune Convalescent Center, a nursing home. Because of her mental condition, her daughter, Beverly...

Answered: 1 week ago

Question

★★★★★
Let V (z) be the potential on the axis of an axially symmetric electrostatic potential in vacuum. Show that the potential at any point in space is V(p, z) = 1 fd 0 de V(z+ip cos ().

Answered: 1 week ago

Question

★★★★★
2. Miss McClintock discovered that five of the children in her class were developmentally advanced. All of the students language skills were exploding! Although many of the students still had trouble...

Answered: 1 week ago

Question

★★★★★
An aqueous slum? at 30?C containing 20.0 wt% solids is fed to an evaporator in which enough water is vaporized at 1 atm to produce a product slurry containing 35.0 wt% solids. Heat is supplied to the...

Answered: 1 week ago

Question

★★★★★
Listed here are the total costs associated with the 2015 production of 1,000 drum sets manufactured by TrueBeat The drum sets sell for $469 each Costs 1. Plastic for casing-$22,000 2. Wages of...

Answered: 1 week ago

Question

★★★★★
GWE in store retail is considering closing stores to save a further 20% next year. Given current figures, how many stores would you expect GWE to close? GWE Profit and Loss for (Year 1) Asia...

Answered: 1 week ago

Question

★★★★★
Delta Diamonds uses a periodic inventory system. The company had five one-carat diamonds available for sale this year: one was purchased on June 1 for $900, two were purchased on July 9 for $1,000...

Answered: 1 week ago

Question

★★★★★
Mike was the policy owner and life insured of a 20-year term life insurance policy, with a $500,000 face value, on which he had named his spouse, Rachel, as the beneficiary. Unfortunately, Mike was...

Answered: 1 week ago

Question

★★★★★
sheridan co issued 700,000 of 5-year,6% bonds at 96 on Jan 1 2027. the bonds pay interest annually. compute the total cost of borrowing for these bonds compute the total cost of borrowing for these...

Answered: 1 week ago

Question

★★★★★
Endor Company begins the year with $180,000 of goods in inventory. At year-end, the amount in inventory has increased to $197,000. Cost of goods sold for the year is $1,300,000. Compute Endor's...

Answered: 1 week ago

Question

★★★★★
The Finishing Department of the Maherajah Competition Water Ski Company has the following production and cost data for May 2022: 1. Transferred out: 2,155 water skis. 2. Ending work in process: 625...

Answered: 1 week ago

Question

★★★★★
Using technology, it was determined that the total sum of squares (SST) was 819.2, the sum of squares regression (SSR) was 794.19, and the sum of squares due to error (SSE) was 25.013. Calculate R2...

Answered: 1 week ago

Question

★★★★★
Pleas show all your work and identify which formula you used and what the variables of the equation are P1.4A (LO 3), AP The following data were taken from the records of Clarkson Company for the...

Answered: 1 week ago

Question

★★★★★
What impact has the Internet had on the globalization of small firms? How do you think small companies will use the Internet for business in the future?

Answered: 1 week ago

Question

★★★★★
Explain why the variance accounts need to be closed at the end of the period?

Answered: 1 week ago

Question

★★★★★
You are the accountant for Wok and Egg Roll Express. Following are assumptions about sales for the coming month. Wok offers three basic meals: noodle bowls, egg rolls, and rice bowls. Each meal can...

Answered: 1 week ago

Question

★★★★★
In processes involving pipeline operations or assembly line operations, if the pipeline or assembly line is always full, then beginning and ending WIP inventories are always 50% complete with regard...

Answered: 1 week ago

Question

★★★★★
The management of White Industries is considering a new method of assembling its golf cart. The present method requires 42.3 minutes, on the average, to assemble a cart. The mean assembly time for a...

Answered: 1 week ago

Question

★★★★★
Given the following hypotheses: H0: = 100 H1: 100 A random sample of six resulted in the following values: 118, 105, 112, 119, 105, and 111. Assume a normal population. Using the .05 significance...

Answered: 1 week ago

Question

★★★★★
The liquid chlorine added to swimming pools to combat algae has a relatively short shelf life before it loses its effectiveness. Records indicate that the mean shelf life of a 5-gallon jug of...

Answered: 1 week ago

Previous Question Next Question