Central Systems, Inc

question 63

Multiple Choice

Central Systems, Inc. desires a weighted average cost of capital of 8 percent. The firm has an aftertax cost of debt of 4.8 percent and a cost of equity of 15.2 percent. What debt-equity ratio is needed for the firm to achieve its targeted weighted average cost of capital?

• A)0.38
• B)0.44
• C)1.02
• D)2.25
• E)2.63

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Definitions:

Facilitator

An individual who makes an action or process easy or easier, especially in learning or discussion contexts.

Scenario Analysis

A process of analyzing possible future events by considering alternative possible outcomes (scenarios), thereby helping decision-making in the face of uncertainty.

Alternative Situations

Different scenarios or conditions that could occur, often considered when planning or making decisions.

Uncertainty

The lack of complete certainty, that is, the existence of more than one possibility in the outcome of a future event.