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Suppose Gewicht announces that a debt-to-equity ratio of 0.7 reflects its target capital structure. What weights should Anziell use in the cost of capital calculations?
A debt-to-equity ratio of 0.7 represents a weight on debt of 0.7/1.7 = 0.4118 so that wd = 0.4118 and we = 1 − 0.4118 = 0.5882. These would be the preferred weights to use in a cost of capital calculation.

Tags
Question
Suppose Gewicht announces that a debt-to-equity ratio of 0.7 reflects its target capital structure. What weights should Anziell use in the cost of capital calculations?
?

Tags
Question
Suppose Gewicht announces that a debt-to-equity ratio of 0.7 reflects its target capital structure. What weights should Anziell use in the cost of capital calculations?
A debt-to-equity ratio of 0.7 represents a weight on debt of 0.7/1.7 = 0.4118 so that wd = 0.4118 and we = 1 − 0.4118 = 0.5882. These would be the preferred weights to use in a cost of capital calculation.

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