Problem 19-01 Balance Sheet Effects

Reynolds Construction (RC) needs a piece of equipment that costs $150. RC can either lease the equipment or borrow $150 from a local bank and buy the equipment. If the equipment is leased, the lease would not have to be capitalized. RC's balance sheet prior to the acquisition of the equipment is as follows:

Current assets	$250		Debt	$350
Net Fixed assets	500		Equity	400
Total assets	$750		Total claims	$750

What is RC's current debt ratio? Round your answer to two decimal places. %

What would be the company's debt ratio if it purchased the equipment? Round your answer to one decimal place. %

What would be the debt ratio if the equipment were leased? Round your answer to two decimal places. %