You want to find your target capital structure - 11495

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You want to find your target capital structure. Your company’s weighted average cost of capital is 12.5%. The cost of equity is 15% and the cost of debt is 8%. Given a tax rate of 35%, what is your target debt-equity ratio? 

a. .34 

b. .68

c. .17

d. .25 

 
Solution Description

      You want to find your target capital structure. Your company’s weighted average cost of capital is 12.5%. The cost of equity is 15% and the cost of debt is 8%. Given a tax rate of 35%, what is your target debt-equity ratio?