Montclair Company is considering a project that will require a $500,000 loan. It presently has total liabilities of $220,000 and total assets of $610,000.

1. Compute Montclairs (1) present debt to equity ratio and (b) the debt to equity ratio assuming it borrows $500,000 to fund the project.

2. Evaluate and discuss the level of risk involved if Montclair borrows the funds to pursue the project.