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Black & White Ltd. Has a cost of equity of 11% and a pre-tax cost of debt of 8.5%. The firm’s target Weighted average cost of capital is 9% and its tax rate is 35%. What is the firm’s target debt-equity ratio?

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Question:

Black & White Ltd. Has a cost of equity of 11% and a pre-tax cost of debt of 8.5%. The firm’s target Weighted average cost of capital is 9% and its tax rate is 35%. What is the firm’s target debt-equity ratio?

A.

0.6203

B.

0.5756

C.

0.5572

D.

0.5113

Answer» b. 0.5756

Note: The above multiple-choice question is for all general and Competitive Exams in India.