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yarga [219]
1 year ago
10

brutus co. exists in a world with taxes, but otherwise, capital markets are perfect. brutus co's debt cost of capital is 6%, its

equity cost of capital is 11%, its weighted average cost of capital is 5.8% and its tax rate is 25%. what's brutus co's leverage ratio? group of answer choices 40% 80% 20% 60%
Business
1 answer:
FinnZ [79.3K]1 year ago
5 0

Brutus co's leverage ratio is  40%

<h3>What leverage ratio?</h3>
  • The weighted average cost of capital (WACC), which includes common stock, preferred stock, bonds, and other types of debt, is the average after-tax cost of capital for a company. The WACC is the typical interest rate that a business anticipates paying to finance its assets.
  • The rate that a business is anticipated to charge on average to all of the holders of its securities in order to fund its

Cost of capital is 6%, its equity cost of capital is 11%, its weighted average cost of capital is 5.8% and its tax rate is 25%.

WACC = (5.8% x 25%) + (5.8% x 11% x 6%)

WACC = 3.973

WACC =   40%

Brutus co's leverage ratio is  40%

To learn more about WACC refer to:

brainly.com/question/25566972

#SPJ4

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