Determine targeted weighted average cost of capital

Question

Problem:

Phil's Carvings, Inc. wants to have a weighted average cost of capital of 9.2 percent. The firm has an aftertax cost of debt of 6.4 percent and a cost of equity of 12.8 percent.

Required:

Question: What debt-equity ratio is needed for the firm to achieve their targeted weighted average cost of capital?

• 2.29
• 0.64
• 0.78
• 1.29
• 1.78

Note: Please show guided help with steps and answer.