Business Finance Homework Help

Burgoyne Inc. recently issued new securities to finance a new TV show. The project cost $14.80 million, and the company paid $805,000 in flotation costs. In addition, the equity issued had a flotation cost of 7.80 percent of the amount raised, whereas, the debt issued had a flotation cost of 3.80 percent of the amount raised. If Hudson issued new securities in the same proportion as its target capital structure, what is the company’s target debt-equity ratio?

A.D/E = 2.44
B.D/E = 1.94
C.D/E = 1.44
D.D/E = 0.94