Central Systems, Inc. desires a weighted average cost of capital of 10 percent. The firm has an after-tax cost of debt of 6 percent and a cost of equity of 12 percent. What debt-equity ratio is needed for the firm to achieve its targeted weighted average cost of capital? A) 0.33 B) 0.50 C) 0.40 D) 0.67 E) 0.60

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter13: Capital Structure Concepts
Section: Chapter Questions
Problem 4P
icon
Related questions
Question
100%

Solve general accounting question Don't use ai and chatgpt

Central Systems, Inc. desires a weighted average cost of capital of 10
percent. The firm has an after-tax cost of debt of 6 percent and a cost of
equity of 12 percent. What debt-equity ratio is needed for the firm to
achieve its targeted weighted average cost of capital?
A) 0.33
B) 0.50
C) 0.40
D) 0.67
E) 0.60
Transcribed Image Text:Central Systems, Inc. desires a weighted average cost of capital of 10 percent. The firm has an after-tax cost of debt of 6 percent and a cost of equity of 12 percent. What debt-equity ratio is needed for the firm to achieve its targeted weighted average cost of capital? A) 0.33 B) 0.50 C) 0.40 D) 0.67 E) 0.60
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Entrepreneurial Finance
Entrepreneurial Finance
Finance
ISBN:
9781337635653
Author:
Leach
Publisher:
Cengage