parpar
Nov 13, 2011, 03:54 PM
1. The General Store has a cost of equity of 15.8 percent, a pre-tax cost of debt of 7.7 percent, and a tax rate of 32 percent. What is the firm's weighted average cost of capital if the debt-equity ratio is 0.40?
A. 10.18 percent
B. 11.72 percent
C. 12.78 percent
D. 13.30 percent
E. 14.93 percent12.
2. A firm wants to create a weighted average cost of capital (WACC) of 10.4 percent. The firm's cost of equity is 14.5 percent and its pre-tax 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
A. 10.18 percent
B. 11.72 percent
C. 12.78 percent
D. 13.30 percent
E. 14.93 percent12.
2. A firm wants to create a weighted average cost of capital (WACC) of 10.4 percent. The firm's cost of equity is 14.5 percent and its pre-tax 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