KCE Co Is Operating at Its Target Capital Structure with Market

question 153

Multiple Choice

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

• A) $12.4 million
• B) $18.5 million
• C) $19.6 million
• D) $24.8 million
• E) $32.0 million

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Definitions:

Journal Entry

A record in the accounting journal that represents a transaction and includes debits and credits.

Cash Register Overages

The situation where the amount of cash in a cash register exceeds the expected amount based on sales records.

Petty Cash Fund

A small amount of cash kept on hand within a business for minor, day-to-day expenses.

Cash Equivalents

Short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.