Fama's Llamas has a weighted average cost of capital of 11 percent. The company's cost of equity is 15 percent, and its pretax cost of debt is 7.5 percent. The tax rate is 32 percent. What is the company's target debt-equity ratio? a) 0.678 b) 0.7119 c) 0.7051 d) 1.1429 e) 0.6441
Fama's Llamas has a weighted average cost of capital of 11 percent. The company's cost of equity is 15 percent, and its pretax cost of debt is 7.5 percent. The tax rate is 32 percent. What is the company's target debt-equity ratio? a) 0.678 b) 0.7119 c) 0.7051 d) 1.1429 e) 0.6441
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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