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Required information [The following information applies to the questions displayed below.] Thrillville has $39.1 million in bonds payable. One of the contractual agreements in
Required information [The following information applies to the questions displayed below.] Thrillville has $39.1 million in bonds payable. One of the contractual agreements in the bond is that the debt to equity ratio cannot exceed 2.0. Thrillville's total assets are $79.1 million, and its liabilities other than the bonds payable are $9.1 million. The company is considering some additional financing through leasing. The company enters a lease agreement requiring lease payments with a present value of $14.1 million. 4-a. Will entering into the lease cause the debt to equity ratio to be in violation of the contractual agreement in the bond? 4-b. Determine your answer by calculating the debt to equity ratio after recording the lease.
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