Company target debt-equity ratio, Accounting Basics

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Company target debt-equity ratio

Problem:

Fama's Llamas has a weighted average cost of capital of 9.6 percent. The company's cost of equity is 12 percent, and its pretax cost of debt is 7.9 percent. The tax rate is 35 percent.

Required:

Question 1: What is the company's target debt-equity ratio?

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Accounting Basics: Company target debt-equity ratio

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Accounting Basics: Company target debt-equity ratio

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