Fama’s Llamas has a weighted average cost of capital of 8.4 percent. The company’s cost of equity is 11 percent, and its pretax cost of debt is 5.8 percent. The tax rate is 25 percent. What is the company’s target debt-equity ratio? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.)
Fama’s Llamas has a weighted average cost of capital of 8.4 percent. The company’s cost of equity is 11 percent, and its pretax cost of debt is 5.8 percent. The tax rate is 25 percent. What is the company’s target debt-equity ratio? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.)
Chapter13: Capital Structure Concepts
Section: Chapter Questions
Problem 7P
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Fama’s Llamas has a weighted average cost of capital of 8.4 percent. The company’s
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