Being Human, 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 round intermediate calculations and round your answer to 4 decimal places, e. g., .1616.)

0.7684

Explanation:

The computation of debt-equity ratio is shown below:-

Let the amount of equity issued = x

Amount of debt = Project cost + Flotation cost - Amount of equity issued

$13,500,000 + $675,000 - x

Net amount received from equity = Amount of equity issued × (1 - Equity issued percentage)

= x × (1 - 0.065)

= Flotation cost of equity = Amount of equity issued × Equity issued percentage)

= x × 0.065

Net amount received from debt = (Project cost + Flotation cost - Amount of equity issued) × (1 - Debt issued percentage)

= ($13,500,000 + $675,000 - x) × (1 - 0.025)

Conditionally

x × 0.065 + ($13,500,000 + $675,000 - x) × 0.025 = $675,000

0.04 × x + $354,375  = $675,000

0.04 × x= $320,625

x = $8,015,625

Debt = $13,500,000 + $675,000 - $8,015,625

= $6,159,375

Target debt-equity ratio = Debt ÷ Equity

= $6,159,375 ÷ $8,015,625

= 0.7684

2 weeks ago lol enoy your dunce cap

if you use only 25 for your entertainment and only 200 for the groceries that you really need and take out the 50 per month for the computer then that should be enough