Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Harrison, Inc., has the following book value balance sheet: Assets Total Debt and Equity Current assets $ 155,000,000 Total debt $ 225,000,000 Equity Common stock
| Harrison, Inc., has the following book value balance sheet: |
| Assets | Total Debt and Equity | |||||
| Current assets | $ | 155,000,000 | Total debt | $ | 225,000,000 | |
| Equity | ||||||
| Common stock | $ | 45,000,000 | ||||
| Capital surplus | 80,000,000 | |||||
| Net fixed assets | 375,000,000 | Accumulated retained earnings | 180,000,000 | |||
| Total shareholders' equity | $ | 305,000,000 | ||||
| Total assets | $ | 530,000,000 | Total debt and shareholders' equity | $ | 530,000,000 | |
| a. | What is the debt-equity ratio based on book values? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) |
| b. | Suppose the market value of the company's debt is $226.5 million and the market value of equity is $700 million. What is the debt-equity ratio based on market values? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started