Last year. Arbor Corporation reported the following:

This year, Arbor is considering whether to issue more debt to fund a $100,000 project or to issue additional shares of common stock. Both options will bring in exactly $100,000. Arbor's current debt contracts contain a debt covenant that requires it to maintain a debt-to-equity ratio of 2.0 or less.
Required:
1. Calculate Arbor's current debt-to-equity ratio.
2. Calculate Arbor's debt-toequity ratio assuming it funds the project using additional debt.
3. Calculate Arbor's debt-to-equity ratio assuming it funds the project by issuing common stock.
4. How do you recommend Arbor fund the project?

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BALANCE SHEET Total Assets Total Liabilities Total Shareholders' Equity $800,000 500,000 S300,000