8:44 PM O ll 83 Answered: Here is the .. bartleby.com = bartleby E Q&A Sign In Business / Finance / Q&A Library / Here is the problem: F... Here is the problem: Famas's LLamas h... Famas's LLamas has a weighted average cost of capital of 7.9%. The company's cost of equity is 11% and its pretaxt cost of debt is 5.8%. The taxt rate is 25%. What is the company's target debt- equity ratio? Here is the solution: Here we have the WACC and need to find the debt-equity ratio of the company. Setting up the WACC equation, we find: WACC = .0790 =.11(E/M) + .058(D/)(1 – .25) Rearranging the equation, we find: .0790(V/E) = .11+.058(.75)(D/E) %3D Now we must realize that the V/E is just the equity multiplier, which is equal to:

8:44 PM O ll 83 Answered: Here is the .. bartleby.com = bartleby E Q&A Sign In Business / Finance / Q&A Library / Here is the problem: F... Here is the problem: Famas's LLamas h... Famas's LLamas has a weighted average cost of capital of 7.9%. The company's cost of equity is 11% and its pretaxt cost of debt is 5.8%. The taxt rate is 25%. What is the company's target debt- equity ratio? Here is the solution: Here we have the WACC and need to find the debt-equity ratio of the company. Setting up the WACC equation, we find: WACC = .0790 =.11(E/M) + .058(D/)(1 – .25) Rearranging the equation, we find: .0790(V/E) = .11+.058(.75)(D/E) %3D Now we must realize that the V/E is just the equity multiplier, which is equal to:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Cost of Production

In economic theory, production costs are the costs incurred by an industrial organization when it engineers a project or provides a service that generates revenue and benefits. Labor costs, raw materials, consumable manufacturing costs, and general overhead sum up, accounting for production costs. Total cost data is calculated by combining total direct costs of materials, labor costs, and total production costs.

Question

I need help especifically with the part where they rearrange the equation as:

.0790(V/E) = .11 + .058(.75)(D/E).

How do they get an inverse (V/E) on the left side without the .11. And how do they get a (D/E) ratio.

8:44 PM O
ll
83
Answered: Here is the ..
bartleby.com
= bartleby
E Q&A
Sign In
Business / Finance / Q&A Library / Here is the problem: F...
Here is the problem: Famas's LLamas h...
Famas's LLamas has a weighted average cost of
capital of 7.9%. The company's cost of equity is
11% and its pretaxt cost of debt is 5.8%. The taxt
rate is 25%. What is the company's target debt-
equity ratio?
Here is the solution:
Here we have the WACC and need to find the
debt-equity ratio of the company. Setting up the
WACC equation, we find:
WACC = .0790 =.11(E/M) + .058(D/)(1 – .25)
Rearranging the equation, we find:
.0790(V/E) = .11+.058(.75)(D/E)
%3D
Now we must realize that the V/E is just the
equity multiplier, which is equal to:

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