What is the company's target debt-equity ratio ? Fama's Llamas has a weighted average cost of capitalof 11 percent. The company's cost of equity is 15percent, and its pretax cost of debt is 7.5 percent. Thetax rate is 32 percent. What is the company's targetdebt-equity ratio?a) 0.678b) 0.7119c) 0.7051d) 1.1429e) 0.6441

Approach to solving the question: Step 1: Understand the WACC FormulaWeighted Average Cost of…

Answered: Fama's Llamas has a weighted average…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Fama's Llamas has a weighted average cost of capital of 9.7 percent. The company's cost of equity is 12 percent, and its pretax cost of debt is 7.4 percent. The tax rate is 25 percent. What is the company's target debt-equity ratio?
Company X has a cost of equity of 16.31% and a pretax cost of debt of 7.8%. The debt-equity ratio is 0.56 and the tax rate is 21%. What is the unlevered cost of capital? A )14.01% b) 13.85% c) 13.70% D) 14.08% E)14.26%
The ABCCompany has a cost of equity of 21.2 percent, a pre-tax cost of debt of 5.2percent, and a tax rate of 30 percent. What is the firmâ€™s weighted average costof capital if the proportion of debt is 65.6%?Note: Enter your answer rounded off to two decimal points.Do not enter % in the answer box. For example, if your answer is 0.12345 thenenter as 12.35 in the answer box.
Evans Technology has the following capital structure. Debt Common equity The aftertax cost of debt is 8.50 percent, and the cost of common equity (in the form of retained earnings) is 15.50 percent. a. What is the firm's weighted average cost of capital? Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places. 48% 60 Debt Common equity Weighted average cost of capital Weighted Cost % % An outside consultant has suggested that because debt is cheaper than equity, the firm should switch to a capital structure that is 50 percent debt and 50 percent equity. Under this new and more debt-oriented arrangement, the aftertax cost of debt is 9.50 percent, and the cost of common equity (in the form of retained earnings) is 17.50 percent. b. Recalculate the firm's weighted average cost of canital
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Give typing answer with explanation and conclusion Fama's Llamas has a weighted average cost of capital of 11.5 per cent. The company's cost of equity is 16 per cent, and its cost of debt is 8.5 per cent. The tax rate is 35 per cent. What is Fama's debt–equity ratio?
Gates Appliances has a return-on-assets (investment) ratio of 20 percent. a. If the debt-to-total-assets ratio is 25 percent, what is the return on equity? (Input your answer as a percent rounded to 2 decima) places.) b. If the firm had no debt, what would the return-on-equity ratio be? (Input your answer as a percent rounded to 2 decimal places.)
X company has an unlevered cost of capital of 11%, a cost of debt of 8%, and a tax rte of 35%. What is the target debt-equity ratio if the targeted cost of equity is 12%?
Hilltop Paving has a levered equity cost of capital of 14.92 percent. The debt-to-value ratio is .4, the assumed tax rate is 23 percent, and the pretax cost of debt is 7.2 percent. What is the estimated unlevered cost of equity?
Question: Fama's Llamas has a weighted average cost of capital of 9.5%. The company's cost of equity is 11%, and its cost of debt is 7.5%. The tax rate is 40%. What is the company's debt- equity ratio? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.)

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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