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Sorry if this is a really daft question.
When looking at the formula for part b and for part c, when putting in the numbers for the debt to equity ratio:
b) 50/50 debt to equity ratio but in the formula we use 1/1+1(1-0.25)
c) 40/60 debt to equity ratio and in the formula we use 1/1+0.4(1-0.25)
I am struggling to understand the ratio. I know it’s probably something really simple.
For instance, why isn’t the calculation done as 0.5/0.5 + 0.5(1-0.25)
Or for part b, why isn’t the calculation done as 0.6/0.6+0.4(1-0.25)