Fama's Llamas has a weighted average cost of capital of 10 percent. The company's cost of equity is 14 percent and its pretax cost of debt is 7.5 percent. The tax rate is 25 percent. What is the company's debt-equity ratio?

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Fama's Llamas has a weighted average cost of
capital of 10 percent. The company's cost of
equity is 14 percent and its pretax cost of debt
is 7.5 percent. The tax rate is 25 percent. What
is the company's debt-equity ratio?
Transcribed Image Text:Fama's Llamas has a weighted average cost of capital of 10 percent. The company's cost of equity is 14 percent and its pretax cost of debt is 7.5 percent. The tax rate is 25 percent. What is the company's debt-equity ratio?
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