HG Lang Designs operates an exclusive bridal boutique in Manhattan. All gowns are designed by Lang but are manufactured by various small firms in France and Italy. The following financial information for the company relates to Problems 1 through 4.

HG Lang is planning on opening a new store in Miami that will be financed in part by a new bank loan of \(\$ 1,000,000\).
Required

a. Assuming debt was \(\$ 1,000,000\) higher in 2009 , what would the debt-to-equity ratio have been?
b. Assume that the additional debt will add \(\$ 80,000\) of interest expense. What would times interest earned have been in 2009 if interest expense had been \(\$ 80,000\) higher?
c. Assume you are a bank manager evaluating the potential \(\$ 1,000,000\) loan to HG Lang. Explain why you would or would not be favorably inclined to make the loan.

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HG Lang Designs Balance Sheets December 31, 2009 December 31, 2008 Assets Current assets: Cash Accounts receivable Inventory Other current assets Total current assets Buildings, furniture, and fixtures, net Total assets 62,541 $ 84,584 338,652 320,378 1,725,425 59,859 2,186,477 1,548,942 $ 3,735,419 1,695,785 62,587 2,163,334 1,548,942 $ 3,712,276