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I understand this question has been previously posted, but I need more insight, please show quality work and thought. Explain process step by step and
I understand this question has been previously posted, but I need more insight, please show quality work and thought. Explain process step by step and show all the formulas you use.
Reynolds Construction needs a piece of equipment that costs $200. Reynolds can either lease the equipment or borrow $200 from a local bank and buy the equipment. If the equipment is leased, the lease would not have to be capitalized. Reynoldss balance sheet prior to the acquisition of the equipment is as follows: Item Current assets Fixed assets Total assets Amount 300 500 800 Item Debt Equity Total claims Amount 400 400 800 a. What is Reynolds's current debt ratio? b. What would the company's debt ratio be if it purchased the equipment? c. What would the company's debt ratio be if the equipment were leased? d. Would the company's financial risk be different under the leasing and purchasing alternativesStep by Step Solution
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