Corporate Finance
Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
Question
Book Icon
Chapter 13, Problem 18QAP
Summary Introduction

Adequate information:

Project cost CP = $30,000,000

Flotation costs CF = $1,900,000

Equity flotation cost fe = 7%

Debt flotation cost fd = 3%

To compute: Debt-equity ratio for the company M.

Introduction: The Debt-equity ratio refers to the evaluation of the proportion of business capital financed with equity capital and debt.

Blurred answer
Students have asked these similar questions
Pardon Me, Inc., recently issued new securities to finance a new TV show. The project cost $14.7 million, and the company paid $795,000 in flotation costs. In addition, the equity issued had a flotation cost of 7.7 percent of the amount raised, whereas the debt issued had a flotation cost of 3.7 percent of the amount raised. If the company issued new securities in the same proportion as its target capital structure, what is the company’s target debt−equity ratio?
Delights, Inc., recently issued new securities to finance a new TV show. The project cost $35 million, and the company paid $2.2 million in flotation costs. In addition, the equity issued had a flotation cost of 7 percent of the amount raised, whereas the debt issued had a flotation cost of 3 percent of the amount raised. If the company issued new securities in the same proportion as its target capital structure, what is the company’s target debt-equity ratio?
Cookies 'n Cream, Incorporated, recently issued new securities to finance a new TV show. The project cost $45 million, and the company paid $2.2 million in flotation costs. In addition, the equity issued had a flotation cost of 7 percent of the amount raised, whereas the debt issued had a flotation cost of 2 percent of the amount raised. If the company issued new securities in the same proportion as its target capital structure, what is the company's target debt-equity ratio? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., .1616.) Debt-equity ratio
Knowledge Booster
Background pattern image
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT