1-Fama’s Llamas has a WACC of 11 percent. The company’s cost of equity is 14.6 percent, and its pretax cost of debt is 8.2 percent. The tax rate is 30 percent.
What is the company’s target debt–equity ratio? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.)
Debt–equity ratio
2-Bargeron Corporation has a target capital structure of 60 percent common stock, 5 percent preferred stock, and 35 percent debt. Its cost of equity is 13 percent, the cost of preferred stock is 6 percent, and the pretax cost of debt is 7.7 percent. The relevant tax rate is 35 percent.
a. What is the company’s WACC? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
WACC