A company enters into a lease agreement for a new ride. The lease payments have a present value of $3.1 million. Prior to this agreement, the companys total assets are $28.3 million and its total liabilities are $16.1 million.

Required:

1. Calculate total stockholders equity prior to the lease agreement. (Enter your answer in millions not in dollars (i.e., $5,000,000 should be entered as 5). Round your answer to 2 decimal places.)

2. & 3. Calculate the debt to equity ratio, prior to the lease being signed and immediately after the lease being signed. (Round your answers to 2 decimal places.)

4. Does the direction of the change in the debt to equity ratio typically indicate that the company has higher leverage risk?

multiple choice

• Yes

• No