FIN/571 – Central Systems, Inc. desires a weighted average cost

FIN/571 – Central Systems, Inc. desires a weighted average cost

Subject: Business    / Finance
Question

Central Systems, Inc. desires a weighted average cost of capital of 10 percent. The firm has an after-tax cost of debt of 6 percent and a cost of equity of 12 percent. What debt-equity ratio is needed for the firm to achieve its targeted weighted average cost of capital?

.67

.60

.50

.40

.33