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 $88 million. Fessenden's current level of equity is $460 million and its current level of interest-bearing debt is $621 million. Fessenden has a cash balance of $69 million. It will finance the acquisition with a 10-year bond of $88 million that carries a 5% interest rate sold at par. * Your answer is incorrect 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.) Debt to Equity 1.28 21 Net Debt as a Percentage of Total Capitalization 0.53 1 e Textbook and Media Your answer is partially correct. 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.) Debt to Equity 1.46 :1 Net Debt as a Percentage of Total Capitalization 0.53 31 Fessenden cannot acquire Sonar Corporation e Textbook and Media Save for Later Attempts: 1 of 3 used Submit