Clayton Industries has the following account balances: Current assets Noncurrent assets $ 30,000 80,000 Current liabilities Noncurrent liabilities Stockholders' equity $ 7,000 43,000 60,000 The company wishes to raise $35,000 in cash and is considering two financing options: Clayton can sell $35,000 of bonds payable, or it can issue additional common stock for $35,000. To help in the decision process, Clayton's management wants to determine the effects of each alternative on its current ratio and debt-to-assets ratio. Required a-1. Compute the current ratio for Clayton's management. (Round your answers to 2 decimal places.) Current Ratio to 1 Currently If bonds are issued If stock is issued to 1 to 1 a-2. Compute the debt-to-assets ratio for Clayton's management. (Round your answers to 1 decimal place.) Debt to Assets Ratio % Currently If bonds are issued % If stock is issued % b. Assume that after the funds are invested, EBIT amounts to $19,400. Also assume the company pays $3,000 in dividends or $3,000 in interest depending on which source of financing is used. Based on a 40 percent tax rate, determine the amount of the increase in retained earnings that would result under each financing option. Additional Retained Earnings Bonds Stock Clayton Industries has the following account balances: Current assets Noncurrent assets $ 30,000 80,000 Current liabilities Noncurrent liabilities Stockholders' equity $ 7,000 43,000 60,000 The company wishes to raise $35,000 in cash and is considering two financing options: Clayton can sell $35,000 of bonds payable, or it can issue additional common stock for $35,000. To help in the decision process, Clayton's management wants to determine the effects of each alternative on its current ratio and debt-to-assets ratio. Required a-1. Compute the current ratio for Clayton's management. (Round your answers to 2 decimal places.) Current Ratio to 1 Currently If bonds are issued If stock is issued to 1 to 1 a-2. Compute the debt-to-assets ratio for Clayton's management. (Round your answers to 1 decimal place.) Debt to Assets Ratio % Currently If bonds are issued % If stock is issued % b. Assume that after the funds are invested, EBIT amounts to $19,400. Also assume the company pays $3,000 in dividends or $3,000 in interest depending on which source of financing is used. Based on a 40 percent tax rate, determine the amount of the increase in retained earnings that would result under each financing option. Additional Retained Earnings Bonds Stock