Central Systems,Inc

Multiple Choice

Central Systems,Inc.desires a weighted average cost of capital of 8 percent.The firm has an aftertax cost of debt of 5.4 percent and a cost of equity of 15.2 percent.What debt-equity ratio is needed for the firm to achieve its targeted weighted average cost of capital?

A) 0.38
B) 0.44
C) 1.02
D) 2.77
E) 3.63