An All-Equity Firm Has a Cost of Capital of 12

question 51

Multiple Choice

An all-equity firm has a cost of capital of 12.8 percent and a tax rate of 23 percent.At the firm's target debt-equity ratio,the pretax cost of debt is 7.35 percent and the cost of equity is 15.07 percent.What is the target debt-equity ratio?

• A).67
• B).49
• C).51
• D).61
• E).54

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