Phil's carvings wants to have a weighted average cost of capital of 9.5 percent. the firm has an aftertax cost of debt of 6.5 percent and a cost of equity of 12.75 percent. what debt-equity ratio is needed for the firm to achieve its targeted weighted average cost of capital?

Equity 48%

Debt 52%

Explanation:

Ke 12.75%

Kd(1-t) =  (debt after-tax) 6.5%

desired WACC = 9.5%

which capital srtucture provides this WACC ?

we know that:

weight of equity + weight of debt = 1

weight of debt = 1 - weight of equity

we can solve for weight of equity

weight of equity = 0.48 = 48%

weight of debt= 1- weight of equity  = 1 - 0.48 = 0.52 = 52%

hi noah!

the first time you break a rule, you get a warning.

if you continue to break rules you get kicked out for a certain amount of time.

so, to answer your question 1.

hope this buddy!

- courtney

answer; /// the above statement is (true);