A Firm Wants to Create a WACC of 10

question 31

Multiple Choice

A firm wants to create a WACC of 10.4 percent.The firm's cost of equity is 14.5 percent and its pretax cost of debt is 8.5 percent.The tax rate is 34 percent.What does the debt-equity ratio need to be for the firm to achieve its target WACC?

• A)0.51
• B)0.57
• C)0.62
• D)0.70
• E)0.86

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Definitions:

Self-Awareness

The awareness of one's own personality, emotions, intentions, and wishes.

Collective Harm

Damage or negative impact that affects a group of people or community as a whole.

Social Traps

Situations in which individuals or groups, driven by immediate rewards, make decisions that are harmful to them and others in the long run.

Social-Responsibility Norm

A societal rule that urges people to help others who are dependent upon them or in need, based on the expectation of helping those who cannot help themselves.