Answer:
Debt would be issued
amount of debt issuance is $ 198,717,500.00
Explanation:
Target capital structure is Debt/Equity=1.7
Current capital structure=debt value/equity value
equity value=$28.25*4,700,000=$132,775,000.00
debt value=27,000*$1000=$27,000,000
Current D/E=$27,000,000/$132,775,000= 0.20
This implies that debt would to be increased
The required amount of debt is computed below which is x
1.7=x/132,775,000.00
x=1.7*132,775,000.00
x=$ 225,717,500.00
Required debt is $225,717,500.00
amount of debt issue=required debt-existing debt= 225,717,500.00-27,000,000=$198,717,500.00