Crane Corporation has accumulated a significant amount of debt as a result of the recent launch of a constellation of satellites. It is

currently considering acquiring and launching its largest state$-$of$-$the$-$art observation satellite, SkyEye. Crane's existing debt

covenants stipulate that it cannot go beyond a debt$-$to$-$equity ratio of $1\mathrm{.}51$:$1$ and a net debt as a percentage of capitalization ratio of

$0\mathrm{.}81$ : $.$ The acquisition of SkyEye will cost $$210$ million. Crane's current level of equity is $$460$ million, and its current level of interest$-$

bearing debt is $$710\mathrm{.}2$ million. Crane has a cash balance of $$80$ million. It will finance the acquisition with a $15-$year bond of $$200$

million that carries a $7\%$ interest rate sold at par.

Determine Crane's debt to equity ratio and net debt as a percentage of capitalization ratio prior to the proposed acquisition.

$($Round answers to $2$ decimal places, e$.$g$.1\mathrm{.}25$:$1.)$

Debt to equity

Net debt as a percentage of total capitalization

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uestion Part Score

Determine whether Crane could acquire SkyEye with the bond issue and remain in compliance with the existing debt covenants.

$($Round answers to $2$ decimal places, e$.$g$.1\mathrm{.}25$:$1.)$

Debt to equity

:$1$

Net debt as a percentage of total capitalization

:$1$

Crane

acquire SkyEye.