Cookies 'n Cream, Incorporated, recently issued new securities to finance a new TV show. The project cost $45 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 2 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.) Debt-equity ratio

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Cookies 'n Cream, Incorporated, recently issued new securities to finance a new TV
show. The project cost $45 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 2 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.)
Debt-equity ratio
Transcribed Image Text:Cookies 'n Cream, Incorporated, recently issued new securities to finance a new TV show. The project cost $45 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 2 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.) Debt-equity ratio
Ying Import has several bond issues outstanding, each making semiannual interest
payments. The bonds are listed in the following table.
Coupon
Rate
Bond
Price Quote
Maturity
Face Value
24
45,000,000
40,000,000
50,000,000
65,000,000
1
4.00%
103.18
5 years
6.10
8 years
15.5 years
25 years
2
112.80
3.
5.30
107.45
4
4.90
102.75
If the corporate tax rate is 22 percent, what is the aftertax cost of the company's debt?
(Do not round intermediate calculations and enter your answer as a percent rounded
to 2 decimal places, e.g.., 32.16.)
Cost of debt
%
Transcribed Image Text:Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the following table. Coupon Rate Bond Price Quote Maturity Face Value 24 45,000,000 40,000,000 50,000,000 65,000,000 1 4.00% 103.18 5 years 6.10 8 years 15.5 years 25 years 2 112.80 3. 5.30 107.45 4 4.90 102.75 If the corporate tax rate is 22 percent, what is the aftertax cost of the company's debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g.., 32.16.) Cost of debt %
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