If a company finances an expansion in its production facilities by issuing $6 million in preferred stock, using $3.5 million in retained earnings, and obtaining $15 million via a secured loan, it will have a D-E mix closest to: (choose one)
(a) 60 –40
(b) 50 –50
(c) 40 –60
(d ) 30 –70
% debt = 15/(6 + 3.5 + 15)
= 61.2%
% equity = (6 + 3.5)/(6 + 3.5 + 15)
= 38.8%
D-E mix = 61-39
Answer is (a) 60 –40
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