Issues with target debt to equity ratios plz help

equity, target, taking

in book 3 pg 125 schweser target d/e ratio is .25 but while calculating WACC we are taking 80 % equity and 20 % debt.. what i am missing here?? kindly guide thanks in advance.

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发表于 2013-4-28 12:16 | 只看该作者

Debt/equity ratio = debt / equity
= 20 % / 80% = .25
if d/e ratio is given (.25) and asked about debt and equity in percent then do the following
= .25 / 1.25 (d/e ratio divided by d/e ratio + 1 )
= .20 or 20%
20 % is the debt and 80 % is equity.
In order to calculate WACC we take debt and equity in percentage not debt/equity ratio

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Issues with target debt to equity ratios plz help

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