er 10 homework -/5 II Question 7 of 13 View Policies Current Attempt in Progress Fessenden Corporation has accumulated a significant amount of debt as a result of debt-financed acquisitions of other companies. It is currently considering acquiring one of its competitors, Sonar Corporation. Fessenden's existing debt covenants stipulate that it cannot go beyond a debt to equity ratio of 1.25:1 and a net debt as a percentage of capitalization ratio of 0.90-1. The acquisition of Sonar will cost $76 million Fessenden's current level of equity is $450 million and its current level of interest-bearing debt is 5574 million. Fessenden has a cash balance of $79 million. It will finance the acquisition with a 10-year bond of $76 million that carries a 5% interest rate sold at par (a) Determine Fessenden'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, eg 1.25) :1 Debt to Equity Net Debt as a Percentage of Total Capitalization .1 e Textbook and Media Save for Later Attempts: 0 of 3 used Submit Amwer (b) Determine whether Fessenden could acquire Sonar Corporation with the bond issue and still remain in compliance with the existing debt covenants. (Round answers to 2 decimal places, es 1.25.) -15 III Question 7 of 13 wenye acquisition (Round answers to 2 decimal places, es 1.25.) :1 Debt to Equity Net Debt as a Percentage of Total Capitalization :1 e Textbook and Media Save for Later Attempts: 0 of 3 used Submit Antwer (b) Determine whether Fessenden could acquire Sonar Corporation with the bond issue and still remain in compliance with the existing debt covenants. (Round answers to 2 decimal places, eg 1.25.) .1 Debt to Equity Net Debt as a Percentage of Total Capitalization :1 Fessenden acquire Sonar Corporation e Textbook and Media Attempts: 0 of 3 used Submit Answer Save for Later