Chapter 13, Problem 18QAP

Summary Introduction

Adequate information:

Project cost $\left({\text{C}}_{\text{P}}\right)$ = $30,000,000

Flotation costs $\left({\text{C}}_{\text{F}}\right)$ = $1,900,000

Equity flotation cost $\left({\text{f}}_{\text{e}}\right)$ = 7%

Debt flotation cost $\left({\text{f}}_{\text{d}}\right)$ = 3%

To compute: Debt-equity ratio for the company M.

Introduction: The Debt-equity ratio refers to the evaluation of the proportion of business capital financed with equity capital and debt.