Question

# Goodbye, Inc., recently issued new securities to finance a new TV show. The project cost \$14.7...

Goodbye, 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? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.)

Let x be Equity and y be Debt in millions

Hence,
x+y=14.7
x*7.7%+y*3.7%=0.795

=>x=6.2775 million and
y=8.4225 million

Target Debt Equity Ratio=8.4225/6.2775=1.341696535

#### Earn Coins

Coins can be redeemed for fabulous gifts.

Similar Homework Help Questions
• ### Macfarlane, Inc., recently issued new securities to finance a new TV show. The project cost \$13.5...

Macfarlane, Inc., recently issued new securities to finance a new TV show. The project cost \$13.5 million and the company paid \$675,000 in flotation costs. In addition, the equity issued had a flotation cost of 6.5 percent of the amount raised, whereas the debt issued had a flotation cost of 2.5 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...

• ### Being Human, Inc., recently issued new securities to finance a new TV show. The project cost...

Being Human, Inc., recently issued new securities to finance a new TV show. The project cost \$14.9 million, and the company paid \$815,000 in flotation costs. In addition, the equity issued had a flotation cost of 7.9 percent of the amount raised, whereas the debt issued had a flotation cost of 3.9 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...

• ### Being Human, Inc., recently issued new securities to finance a new TV show. The project cost...

Being Human, Inc., recently issued new securities to finance a new TV show. The project cost \$14.4 million, and the company paid \$765,000 in flotation costs. In addition, the equity issued had a flotation cost of 7.4 percent of the amount raised, whereas the debt issued had a flotation cost of 3.4 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...

• ### Judson Inc. recently issued new securities to finance a new TV show. The project cost \$13.0...

Judson Inc. recently issued new securities to finance a new TV show. The project cost \$13.0 million, and the company paid \$625,000 in flotation costs. In addition, the equity issued had a flotation cost of 6.0% of the amount raised, whereas the debt issued had a flotation cost of 2.0% of the amount raised. If Judson 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....

• ### Being Human, Inc., recently issued new securities to finance a new TV show. The project cost...

Being Human, Inc., recently issued new securities to finance a new TV show. The project cost \$13.9 million, and the company paid \$715,000 in flotation costs. In addition, the equity issued had a flotation cost of 6.9 percent of the amount raised, whereas the debt issued had a flotation cost of 2.9 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...

• ### Being Human, Inc., recently issued new securities to finance a new TV show. The project cost...

Being Human, 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?...

• ### Problem 13-14 Calculating Flotation Costs Suppose your company needs \$12 million to build a new assembly...

Problem 13-14 Calculating Flotation Costs Suppose your company needs \$12 million to build a new assembly line. Your target debt-equity ratio is .5. The flotation cost for new equity is 12 percent and the flotation cost for debt is 9 percent. Your boss has decided to fund the project by borrowing money because the flotation costs are lower and the needed funds are relatively small. a. What is your company’s weighted average flotation cost, assuming all equity is raised externally?...

• ### Suppose your company needs \$14 million to build a new assembly line. Your target debt-equity ratio...

Suppose your company needs \$14 million to build a new assembly line. Your target debt-equity ratio is .5. The flotation cost for new equity is 10 percent and the flotation cost for debt is 7 percent. Your boss has decided to fund the project by borrowing money because the flotation costs are lower and the needed funds are relatively small. a. What is your company’s weighted average flotation cost, assuming all equity is raised externally? (Do not round intermediate calculations...

• ### newconnect.mheducation.com Ch 14) Saved Suppose your company needs \$17 million to build a new assembly line. Your...

newconnect.mheducation.com Ch 14) Saved Suppose your company needs \$17 million to build a new assembly line. Your target debt-equity ratio is .75. The flotation cost for new equity is 10 percent, but the flotation cost for debt is only 7 percent. Your boss has decided to fund the project by borrowing money because the flotation costs are lower and the needed funds are relatively small. a. What is your company's weighted average flotation cost, assuming all equity is raised externally?...

• ### Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt-equity ratio...

Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt-equity ratio of .7. It’s considering building a new \$65 million manufacturing facility. This new plant is expected to generate aftertax cash flows of \$7.7 million in perpetuity. The company raises all equity from outside financing. There are three financing options: 1. A new issue of common stock: The flotation costs of the new common stock would be 7.3 percent of the amount raised. The required...