Fama's Llamas Has a Weighted Average Cost of Capital of 9.5

question 62

Multiple Choice

Fama's Llamas has a weighted average cost of capital of 9.5 percent.The company's cost of equity is 15.5 percent,and its pretax cost of debt is 8.5 percent.The tax rate is 34 percent.What is the company's target debt-equity ratio?

• A)0.89
• B)0.92
• C)0.98
• D)1.01
• E)1.54

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Definitions:

Flextime

Flexible working hours that permit employees the option of choosing daily starting and quitting times provided that they work a set number of hours per day or week.

Specified Number

A particular or distinct quantity that has been defined or mentioned, often within a context requiring precise identification.

Job Sharing

The arrangement whereby two part-time employees perform a job that otherwise would be held by one full-time employee.

Job Sharing

An employment arrangement where two or more people share the responsibilities and duties of a single full-time job.