Fama target debt-equity ratio, Accounting Basics

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Fama target debt-equity ratio

Problem:

Fama's Llamas has a WACC of 9.90 percent. The company's cost of equity is 12.4 percent, and its cost of debt is 7.3 percent. The tax rate is 38 percent.

Required:

Question: What is Fama's target debt-equity ratio?

Note: Explain all calculation and formulas.

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Accounting Basics: Fama target debt-equity ratio

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