2. 21. Flotation costs [LO 14.4] Being Human Limited recently issued new securities to finance a new

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2. 21.

Flotation costs [LO 14.4] Being Human Limited recently issued new securities to finance a new TV show. The project cost $35 million, and the company paid $2.2 million in flotation costs. In addition, the equity issued had a flotation cost of 7 per cent of the amount raised, whereas the debt issued had a flotation cost of 3 per cent 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-to-equity ratio?

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