What Proportion of a Firm Is Equity Financed If the WACC

question 130

Multiple Choice

What proportion of a firm is equity financed if the WACC is 14%, the after-tax cost of debt is 7.0%, the tax rate is 35%, and the required return on equity is 18%?

• A)54.00%
• B)63.64%
• C)70.26%
• D)77.78% 14% = (1 -x)(7%) + (x)18%
• 14% = 7% = 7% + 18%
• 7%/11% = 11%x/11%

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