What is target debt-equity ratio

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1. A firm has a weighted average cost of capital (WACC) of 11.23 percent, and a cost of equity of 30.92 percent. The weight of debt is 69.92%. Assume no taxes. What is the firm’s cost of debt?

2. Over the past ten years, large-company stocks have returned 13.55 percent. The risk premium on these stocks was 2.01 percent and the inflation rate was 3.7 percent. What was the risk-free rate of return?

3. ABC has an unlevered cost of capital (Ra) of 18.46%, a cost of debt of 9.96%. What is the target debt-equity ratio if the targeted cost of equity (Rs) is 23.64%? Assume no taxes.

Reference no: EM131984082

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