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Shank Co. has a debt-to-asset ratio of 0.4 and $6,000,000 equity. Shank is seeking capital to fund a construction project costing $6,500,000 and is considering

  • Shank Co. has a debt-to-asset ratio of 0.4 and $6,000,000 equity. Shank is seeking capital to fund a construction project costing $6,500,000 and is considering funding the project by both bank borrowings and additional common stock issuance. The current debt covenant requires Shank to fund any project by incurring a maximum of 30% debt. If Shank funds the project with the maximum permitted debt.

  • Calculate the debt-to-equity ratio.

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