Problem #$3(8$ marks$)$

Zheng Inc. recently issued new securities $($common shares and bonds$)$ to finance a new project with a cost $$20$ million. The

equity issued had a flotation cost of $6\%,$ while the debt issued had a flotation cost of $2\%.$ Total flotation cost of this new

security issue was $$1$ million. If Zheng Inc. issued new securities in the same proportion as its target capital structure, what is

the company's target debt to equity ratio?