Question
Fama's Llamas has a weighted average cost of capital of 12.5 percent. The company's cost of equity is 17.5 percent, and its pretax cost of
Fama's Llamas has a weighted average cost of capital of 12.5 percent. The company's cost of equity is 17.5 percent, and its pretax cost of debt is 7.5 percent. The tax rate is 31 percent.
What is the company's target debt-equity ratio?
A. 1
B. 0.6826
C. 0.6485
D. 0.7167
E. 0.7099
Do not copy from Chegg and give complete answer with explanation
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Accounting For Managers Interpreting Accounting Information For Decision Making
Authors: Paul M. Collier
5th Edition
111900294X, 978-1119002949
