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:
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter1: Introduction And Goals Of The Firm
Section: Chapter Questions
Problem 5E
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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.
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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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