Question
The statement of financial position as of December 31, 2020, for Taube Corporation follows: (all amounts in thousands) Assets Liabilities and Shareholders Equity Current assets
The statement of financial position as of December 31, 2020, for Taube Corporation follows: (all amounts in thousands)
Assets | Liabilities and Shareholders Equity | |||||
Current assets | $64,000 | Current liabilities | $27,000 | |||
Non-current assets | 92,000 | Long-term liabilities | 52,000 | |||
Shareholders equity | 77,000 | |||||
Total assets | $156,000 | Total liabilities and shareholders equity | $156,000 |
The companys management is evaluating a couple of options to finance the acquisition of new equipment with a cost of $35 million.
Taube has a cash balance of $20 million as of December 31, 2020. Determine the debt to equity ratio and net debt as a percentage of total capitalization ratio. Assume that only the companys long-term liabilities are interest bearing. (Round answers to 2 decimal places, e.g. 1.25.)
Debt to Equity | :1 | |
Net Debt as a Percentage of Total Capitalization | :1 |
Taube is considering borrowing $35 million by taking out a six-year bank loan that carries 10% interest payable semi-annually. Determine the companys debt to equity and debt as a percentage of total capitalization ratios if it decides to borrow the money and purchase the equipment. (Round answers to 2 decimal places, e.g. 1.25.)
Debt to Equity | :1 | |
Net Debt as a Percentage of Total Capitalization | :1 |
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