FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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
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Transcribed Image Text: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
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