Help

Ferguson Theatres Inc, operates specialty film format theatres that display images of greater size and higher quality resolution. Ferguson is considering expanding its theatres in China and needs to raise $447 million in additional debt. However, the company is concerned about remaining compliant with its existing debt to equity ratio covenant of 1:10:1 and the net debt as a percentage of capitalization ratio of 50%. For the fiscal year ended December 31,2020, an extract of the statement of financial position for Ferguson Theatres showed the following information: total interest-bearing debt of $587 million, a cash balance of $90 million, and shareholders' equity of $800 million. Determine whether Ferguson Theatres Inc. could borrow $447 million and remain in compliance with the bank covenants. (Round debt to equity ratio to 2 decimal places, eg. 1.25 and net debt as a percentage of total copitalization to 0 decimal places, eg. 35\%.) Debt to Equity Net Debt as a Percentage of Total Capitalization