Question
Suppose that a company's equity is currently selling for $42.25 per share and that there are 1.9 million shares outstanding and 29 thousand bonds outstanding,
Suppose that a company's equity is currently selling for $42.25 per share and that there are 1.9 million shares outstanding and 29 thousand bonds outstanding, which are selling at 111.50 percent of par. If the firm was considering an active change to their capital structure so that the firm would have a D/E of 1.9, which type of security (stocks or bonds) would they need to sell to accomplish this, and how much would they have to sell? (Round your intermediate ratio to 4decimal places.
Every answer I see comes up with some number to multiply the D/E ratio by but they never explain what is or where it came from which is why I'm submitting this. I've seen plenty of examples but I don't know how/why/where that number comes from. Thank you.
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