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Harrison, Inc., has the following book value balance sheet: Assets Total Debt and Equity Current assets $ 170,000,000 Total debt $ 202,000,000 Equity Common stock
| Harrison, Inc., has the following book value balance sheet: |
| Assets | Total Debt and Equity | |||||
| Current assets | $ | 170,000,000 | Total debt | $ | 202,000,000 | |
| Equity | ||||||
| Common stock | $ | 40,000,000 | ||||
| Capital surplus | 83,000,000 | |||||
| Net fixed assets | 305,000,000 | Accumulated retained earnings | 150,000,000 | |||
| Total shareholders' equity | $ | 273,000,000 | ||||
| Total assets | $ | 475,000,000 | Total debt and shareholders' equity | $ | 475,000,000 | |
| a. | What is the debt-equity ratio based on book values? |
| b. | Suppose the market value of the company's debt is $203.2 million and the market value of equity is $715 million. What is the debt-equity ratio based on market values? |
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Cases in Financial Reporting
Authors: Michael J. Sandretto
1st edition
538476796, 978-0538476799
