Two textile companies, McNulty-Grunewald Manufacturing and Jackson-Kenny Mills, began operations with identical balance sheets. A year later both required additional manufacturing capacity at a cost of $150,000. McNulty-Grunewald obtained a 5-year, $150,000 loan at a 7% interest rate from its bank. Jackson-Kenny, on the other hand, decided to lease the required $150,000 capacity from National Leasing for 5 years; a 7% return was built into the lease. The balance sheet for each company, before the asset increase, is as follows:

$150,000 150,000 Total assets $300,000 Total liabilities and equity $300,000 Debt Equity a. Show the balance sheet of each firm after the asset increase, and calculate each firm's new debt ratio. (Assume that Jackson-Kenny's lease is kept off the balance sheet.) Round the monetary values to the nearest dollar and percentage values to the nearest whole number McNulty-Grunewald balance sheet: Assets Debt Equity Total liabilities and equity Total assets $ Debt/assets ratio for McNulty-Grunewald- Jackson-Kenny balance sheet; lease not capitalized Assetss Debt Equity Total liabilities and equity $ Total assets $ Debt/assets ratio for Jackson-Kenny b. Show how Jackson-Kenny's balance sheet would have looked immediately after the financing if had capitalized the lease. Round the monetary values to the nearest dollar and the percentage value to the nearest whole number. Assets Value of leased asset$ Debt PV of lease payments Equity Total liabilities and equity Total assets Debt/assets ratio for Jackson-Kenny