Harrison, Inc., has the following book value balance sheet:

a. What is the debt-equity ratio based on book values?
b. Suppose the market value of the company's debt is $225 million and the market value of equity is $670 million. What is the debt-equity ratio based on market values?
c. Which is more relevant, the debt-equity ratio based on book values or market values?
Why?

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Total Debt and Equity Assets Current assets $200,000,000 Total debt $220,000,000 Equity Common stock $30,000,000 Capital surplus Accumulated retained earnings 170,000,000 Net fixed assets $300,000,000 Total shareholders' equity $280,000,000 Total assets$500,000,000 Total debt and shareholders $500,000,000 equity