Wild Ducks Unlimited Wants to Have a Weighted Average Cost

question 323

Multiple Choice

Wild Ducks Unlimited wants to have a weighted average cost of capital of 8.5 %. The firm has an after-tax cost of debt of 4.6 % and a cost of equity of 12 %. What debt-equity ratio is needed for the firm to achieve the targeted weighted average cost of capital?

• A) .66
• B) .72
• C) .77
• D) .84
• E) .90

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Definitions:

Efficiency

The optimal allocation of resources to maximize the desired outputs while minimizing waste or unnecessary effort.

Nationally Franchised

Businesses that operate under a licensing agreement allowing them to sell products or services under a national company's brand and operational model.

Uninformed Consumers

Consumers lacking sufficient information about products or services to make knowledgeable decisions.

Elasticity of Supply

A measure of how much the quantity supplied of a good changes in response to a change in price.