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. RC's balance sheet prior to the acquisition of the equipment is as follows:

Current assets	$350		Debt	$450
Net Fixed assets	400		Equity	300
Total assets	$750		Total claims	$750

1)

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

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

c)What would be the debt ratio if the equipment were leased and the lease not capitalized? Round your answer to two decimal places. _______%

d)What would be the debt ratio if the equipment were leased and the lease where capitalized? Assume that the present value of the lease payments is equal to the cost of the equipment. Round your answer to two decimal places. ______%

2)Would the company's financial risk be different under the leasing and purchasing alternatives? I. The company's financial risk (assuming the implied interest rate on the lease is equivalent to the loan) is greater if the equipment is leased. II. The company's financial risk (assuming the implied interest rate on the lease is equivalent to the loan) is no different whether the equipment is leased or purchased. III. The company's financial risk (assuming the implied interest rate on the lease is less than the interest rate on the loan) is no different whether the equipment is leased or purchased. IV. The company's financial risk (assuming the implied interest rate on the lease is greater than the interest rate on the loan) is no different whether the equipment is leased or purchased.