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The Altman Company has a debt ratio of 33.33 percent, and it needs to raise $100,000 to expand. Management feels that an optimal debt ratio
The Altman Company has a debt ratio of 33.33 percent, and it needs to raise $100,000 to expand. Management feels that an optimal debt ratio would be 16.67 percent. Sales are currently $750,000, and the total assets turnover is 7.5. How should the expansion be financed so as to produce the desired debt ratio?
a. Finance it all with equity.
b. Finance it all with debt.
c. Finance 20 percent debt, 80 percent equity.
d. Finance 40 percent debt, 60 percent equity.
e. Finance 50 percent debt, 50 percent equity.
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