You are a financial manager at a supply company. Your boss has tasked you with...
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Finance
You are a financial manager at a supply company. Your boss has tasked you with making a recommendation to the Board of Directors about what debt/(total assets) ratio should be. In preparation for the analysis, you have gathered the following information about other companies in the supply business: A-One supply Acme supply Apex supply Peak supply Pinnacle supply % debt 15 30 45 60 75 % equity 85 70 55 40 25 B 0.6 0.7 1.0 1.3 1.8 Pre tax rate on debt 3.25% 3.5% 4% 4.5% 5% The corporate tax rate is 20%. The risk free rate is 3% and the expected return on the market portfolio is 8%. What debt/(total assets) ratio will you recommend? Provide an explanation
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