Problemfamas llamas has a weighted average cost of capital, Ask an Expert

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Problem:

Fama's Llamas has a weighted average cost of capital of 9.3 percent. The company's cost of equity is 13 percent, and its pretax cost of debt is 7.3 percent. The tax rate is 40 percent.

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Question: What is the company's target debt equity ratio?

Note: Be sure to show how you arrived at your answer.

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