Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

College Accounting Chapters 1-13

Authors: John Price, M. David Haddock, Michael Farina

15th Edition

125999516X, 9781259995163

Students also viewed these Accounting questions