A firm’s WACC is 13%, its required return on equity is 17%, and its after-tax cost of debt is 6%. What proportion of the firm’s capital structure is debt, and what proportion is equity? (Hint: what do the proportions of debt and equity add to?)
44.2% debt, 55.8% equity
66.7% debt, 52.9% equity
51.5% debt, 48.5% equity
19.1% debt, 80.9% equity
36.4% debt, 63.6% equity