What is the companys target debt to equity ratio, Finance Basics

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What is the companys target debt to equity ratio

Problem

Korda International Inc. recently issued new securities (common shares and bonds) to finance a new project with a cost $16 million. The equity issued had a flotation cost of 8%, while the debt issued had a flotation cost of 2.5%. Total flotation cost of this new security issue was $1.2 million. If Korda International Inc. 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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Finance Basics: What is the companys target debt to equity ratio

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