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A Firm Wants to Create a WACC of 11

Question 66

Multiple Choice

A firm wants to create a WACC of 11.2 percent.The firm's cost of equity is 16.8 percent and its pretax cost of debt is 8.7 percent.The tax rate is 35 percent.What does the debt-equity ratio need to be for the firm to achieve its target WACC?


A) .86
B) .67
C) 1.04
D) .94
E) 1.01

Correct Answer:

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