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lyudmila [28]
4 years ago
7

KCE Co. is operating at its target capital structure with market values of $110 million in equity and $175 million in debt outst

anding. KCE plans to finance a new $32 million project using the same relative weights of debt and equity. Ignoring flotation costs, how much new debt must be issued to fund the project?
Business
1 answer:
Natalija [7]4 years ago
6 0

Answer:

$19.64 million

Explanation:

The computation of new debt is shown below:

= (Market value of debt outstanding ÷ Total market value) × new finance amount

= ($175 million ÷ $285 million) × $32 million

= $19.64 million

The Total market value is computed below:

= Market value of equity + Market value of debt outstanding

= $110 million + $175 million

= $285 million

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