General Corporation has 100 million outstanding shares with a share price of $5, and it...
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General Corporation has 100 million outstanding shares with a share price of $5, and it has outstanding debt with a market value of $300 million. Investors expect a 6% return on debt and 12% return on stock. With the consideration of Modigliani and Miller (MM) Position II without tax,
Katy Corporation wants to have a weighted average cost of capital (WACC) of 10%. The cost of debt is 5%, the cost of equity is 12%, and the tax rate is 20%. There is no other capital except the mentioned debt and equity. With the given information, calculate the debt-equity ratio to achieve the targeted WACC.
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