A Firm Has a Target Debt-To-Equity Ratio of 1

question 18

Multiple Choice

A firm has a target debt-to-equity ratio of 1.Its cost of equity equals 12 percent,the cost of debt is 8 percent,and the tax rate is 30 percent.What is the weighted average cost of capital (WACC) ?

• A)10.0 percent.
• B)10.8 percent.
• C)9.8 percent.
• D)8.8 percent.

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Definitions:

Dominance Hierarchy

The organization of individuals in a group that occurs when competition for resources leads to a ranking of individuals by dominance.

Genetic Capacity

The inherent potential within an organism's genetic material (DNA) to exhibit certain traits or to adapt to environmental changes.

Imprinting

A rapid learning process occurring early in the life of a social animal, in which it forms attachments and develops a concept of its social identity.