ABC Co. wants to have a weighted average cost of capital of 10 percent. The firm has an aftertax cost of debt of 4 percent and a cost of equity of 12 percent. What debt-equity ratio is needed for the firm to achieve their targeted weighted average cost of capital? 0.5 0.33 0.67 0.25 0.75

ABC Co. wants to have a weighted average cost of capital of 10 percent. The firm has an aftertax cost of debt of 4 percent and a cost of equity of 12 percent. What debt-equity ratio is needed for the firm to achieve their targeted weighted average cost of capital? 0.5 0.33 0.67 0.25 0.75

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing

Section: Chapter Questions

Problem 24E: A company had WACC (weighted average cost of capital) equal to 8. % If the company pays off mortgage...

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Question

ABC Co. wants to have a weighted average cost of capital of 10 percent. The firm has an aftertax cost of debt of 4 percent and a cost of
equity of 12 percent. What debt-equity ratio is needed for the firm to achieve their targeted weighted average cost of capital?
0.5
0.33
0.67
0.25
0.75

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