Question: Goodbye Inc recently issued new securities to finance a new
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 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 Goodbye issued new securities in the same proportion as its target capital structure, what is the company’s target debt-to-equity ratio?
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