Hogi Co. currently has a total debt of $252000 and it has issued equity for $420000. It plans to finance its expansion by issuing new equity worth $180000. The total value of equity issued would then be equal to $420000 + $180000 = $600000
Let the amount of money the company is able to borrow from the bank be equal to D. As the maximum debt-equity ratio that the bank is willing to accommodate is 0.75, we get D / $600000 = 0.75
=> D = 0.75*$600000
=> D = $450000
Currently the debt that the company has is $252000, so it can borrow an additional amount of $450000 - $252000 = $198000, while ensuring that the debt equity ratio does not exceed 0.75.
After the new stock is issued, the company can borrow an additional $198000.