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Central Systems, Inc. has a weighted average cost of capital of 8 percent. The firm has an after-tax cost of debt of 4 percent and a cost of equity of 12 percent. What is the firm's debt-equity ratio?
HINT: First get the capital structure weights. Remember they must both sum to one, so (1 - D/V) = E/V.
Now use those weights to get the debt-equity ratio.
1.10
.90
1.17
.83
1.00
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