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Fama's Llamas has a weighted average cost of capital of 8.4 percent. The company's cost of equity is 11 percent, and its pretax cost of debt is 5.8 percent. The tax rate is 25 percent. What is the company's target debt-equity ratio? Input Area: WACC 8.40% Cost of equity 11% Cost of debt 5.80% Tax rate 25% (Use cells A6 to B9 from the given information to complete this question.) Output Area: Debt-equity ratio

Fama's Llamas has a weighted average cost of capital of 8.4 percent. The company's cost of equity is 11 percent, and its pretax cost of debt is 5.8 percent. The tax rate is 25 percent. What is the company's target debt-equity ratio? Input Area: WACC 8.40% Cost of equity 11% Cost of debt 5.80% Tax rate 25% (Use cells A6 to B9 from the given information to complete this question.) Output Area: Debt-equity ratio

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Fama's Llamas has a weighted average cost of capital of 8.4 percent. The company's cost of equity is 11 percent, and its pretax cost of debt is 5.8 percent. The tax rate is 25 percent. What is the company's target debt-equity ratio? Input Area: WACC 8.40% Cost of equity 11% Cost of debt 5.80% Tax rate 25% (Use cells A6 to B9 from the given information to complete this question.) Output Area: Debt-equity ratio
Transcribed Image Text:Fama's Llamas has a weighted average cost of capital of 8.4 percent. The company's cost of equity is 11 percent, and its pretax cost of debt is 5.8 percent. The tax rate is 25 percent. What is the company's target debt-equity ratio? Input Area: WACC 8.40% Cost of equity 11% Cost of debt 5.80% Tax rate 25% (Use cells A6 to B9 from the given information to complete this question.) Output Area: Debt-equity ratio
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