Bigelow, Inc. has a cost of equity of 13.56% and a pre-tax cost of debt of 7%. The required return on the assets is 11%. What is the firm’s debt-equity ratio based on MM Proposition II with no taxes?
The answer is B. .64, but how do you write the calculations? I can't get the right answer. I put .1356 = .11 + (.11-.07) x d/e but cannot get the correct answer. Please help.
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