Chapter 13, Problem 18QP

Flotation Costs Goodbye, Inc., recently issued new securities to finance a new TV show. The project cost $19 million, and the company paid $1,150,000 in notation costs. In addition, the equity issued had a notation cost of 7 percent of the amount raised, whereas the debt issued had allocation 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?