Design Interiors has a cost of equity of 18.6 percent and a pretax cost of debt of 9.7 percent.The firm's target weighted average cost of capital is 12 percent and its tax rate is 35 percent.What is the firm's target debt-equity ratio?
A) 0.81
B) 0.87
C) 0.98
D) 1.02
E) 1.16
Correct Answer:
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