Super Slides has $20 million in bonds payable. As part of the contractual agreement with bondholders, the company guarantees to keep its debt to equity ratio below 2.0. Super Slides' total assets are $90 million and its liabilities, other than the bonds payable, are $40 million. The company needs additional assets and is considering purchasing these assets by issuing a note payable or by leasing.

Required:

1. 1. Calculate total stockholders' equity using the balance sheet equation.
2. 2. What is the debt to equity ratio?
3. 4-a. If the company can obtain the asset by issuing a $2 million note payable, Will issuing the note payable affect the debt to equity ratio?
4. 4-b. If the company can obtain the asset by signing a lease agreement requiring payments with a present value of $2 million, Will the lease agreement affect the debt to equity ratio?
5. 5-a. Calculate the debt to equity ratio assuming they issue a note payable.
6. 5-b. Will issuing the note payable cause the debt to equity ratio to be in violation of the contractual agreement with bondholders?
7. 5-c. Calculate the debt to equity ratio assuming they sign a lease.
8. 5-d. Will signing a lease cause the debt to equity ratio to be in violation of the contractual agreement with bondholders

Calculate total stockholders' equity using the balance sheet equation. (Enter your answers in millions. (i.e., $5,000,000 should be entered as 5).)

Stockholders Equity
			=

What is the debt to equity ratio? (Enter your answers in millions. (i.e., $5,000,000 should be entered as 5).)

Debt to Equity Ratio
			=

If the company can obtain the asset by issuing a $2 million note payable, will issuing the note payable affect the debt to the debt to equity ratio?

	Yesradio button unchecked1 of 2 Noradio button unchecked2 of 2

If the company can obtain the asset by signing a lease agreement requiring payments with a present value of $2 million, will the lease agreement affect the debt to equity ratio?

Yesradio button unchecked1 of 2 Noradio button unchecked2 of 2

Calculate the debt to equity ratio assuming they issue a note payable. (Enter your answers in millions. (i.e., $5,000,000 should be entered as 5).)

With a note payable or lease of $2 million
Debt to Equity Ratio
			=

Will issuing the note payable cause the debt to equity ratio to be in violation of the contractual agreement with bondholders?

	Yesradio button unchecked1 of 2 No

Calculate the debt to equity ratio assuming they sign a lease. (Enter your answers in millions. (i.e., $5,000,000 should be entered as 5).)

With a lease of $2 million
Debt to Equity Ratio
			=

Will signing a lease cause the debt to equity ratio to be in violation of the contractual agreement with bondholders?

	Yesradio button unchecked1 of 2 Noradio button unchecked2 of 2