Ask Question
17 March, 15:10

Bob's Warehouse has a pre-tax cost of debt of 8.4 percent and an unlevered cost of capital of 14.6 percent. The firm's tax rate is 37 percent and the cost of equity is 18 percent. What is the firm's debt-equity ratio?

+3
Answers (1)
  1. 17 March, 18:38
    0
    The firm's debt-equity ratio is 0.87

    Explanation:

    RE = 0.18 = 0.146 + (0.146 - 0.084) * D/E * (1 - 0.37)

    0.18 - 0.146 = 0.062*DE*0.63

    0.034 = 0.03906*DE

    D/E = 0.87

    Therefore, The firm's debt-equity ratio is 0.87
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Bob's Warehouse has a pre-tax cost of debt of 8.4 percent and an unlevered cost of capital of 14.6 percent. The firm's tax rate is 37 ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers