Central Systems Desires a Weighted Average Cost of Capital of 12.7

question 63

Multiple Choice

Central Systems desires a weighted average cost of capital of 12.7 percent. The firm has an aftertax cost of debt of 4.8 percent and a cost of equity of 15.4 percent. What debt-equity ratio is needed for the firm to achieve its targeted weighted average cost of capital?

• A) .37
• B) .42
• C) .56
• D) .34
• E) .44

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Definitions:

Customers

Individuals or entities that purchase goods or services from a company, contributing to the company's revenue.

Balance Sheet

A financial statement that reports a company's assets, liabilities, and shareholder equity at a specific point in time, providing a basis for computing rates of return and evaluating its capital structure.

Investing Activities

Financial actions associated with the purchase and sale of long-term assets and other investments not considered cash equivalents.

Common Stock

A type of equity security that represents ownership in a corporation, with holders typically having voting rights and receiving dividends.