Problem:
Black and White has a cost of equity of 11 percent and a pre-tax cost of debt of 8.5 percent. The firm's target weighted average cost of capital is 9 percent and its tax rate is 35 percent.
Required:
What is the firm's target debt-equity ratio?
a. 48.29
b. 51.13
c. 55.72
d. 57.56
e. 62.03
Note: Please provide equation and explain comprehensively and give step by step solution.