Albright and Company currently has a weighted average cost of capital of 8.6 percent based on a combination of debt and equity financing. The current peercentage debt 0.6 and the aftertax cost of debt is 6.6 percent. The company just hired a new president who is considering eliminating all debt financing. All else constant, what will the firm's cost of capital be if the firm switches to being an all-equity firm?

Answer

		11.6 percent
		10.3 percent
		10.7 percent
		11.5 percent
		11.9 percent

Pets & More's cost of equity is 14 percent and its aftertax cost of debt is 5.5 percent. What is the firm's weighted average cost of capital if their percentage of equity financing is 0.75?

Answer

8.78 percent

9.14 percent

9.26 percent

10.09 percent

11.88 percent

Black and White has a cost of equity of 11 percent and a pre-tax cost of debt of 8.5 percent. The firm's target weighted average cost of capital is 9 percent and its tax rate is 35 percent. What is the firm's target percentage of debt financing?

Answer

		48.29
		51.13
		55.72
		36.53
		62.03