Various capital structures Charter Enterprises currently has

$1.6

million in total assets and is totally equity financed. It is contemplating a change in its capital structure. Compute the amount of debt and equity that would be outstanding if the firm were to shift to each of the following debt ratios:

10%,

20%,

30%,

40%,

50%,

60%,

and

90%.

(Note: The amount of total assets would not change.) Is there a limit to the debt ratio's value?

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Part 1

Calculate the capital structure below: (Round to the nearest dollar.)

Debt Ratio		Debt		Equity
10%	$		$

Part 2

Calculate the capital structure below: (Round to the nearest dollar.)

Debt Ratio		Debt		Equity
20%

Part 3

Calculate the capital structure below: (Round to the nearest dollar.)

Debt Ratio		Debt		Equity
30%

Part 4

Calculate the capital structure below: (Round to the nearest dollar.)

Debt Ratio		Debt		Equity
40%

Part 5

Calculate the capital structure below: (Round to the nearest dollar.)

Debt Ratio		Debt		Equity
50%

Part 6

Calculate the capital structure below: (Round to the nearest dollar.)

Debt Ratio		Debt		Equity
60%

Part 7

Calculate the capital structure below: (Round to the nearest dollar.)

Debt Ratio		Debt		Equity
90%

Part 8

Is there a limit to the debt ratio's value? (Select the best choice below.)

A.Theoretically, the debt ratio cannot exceed

80%.

In practice, few creditors would extend loans to companies with exceedingly high debt ratios

(>70%).

B.Theoretically, the debt ratio cannot exceed

100%.

In practice, few creditors would extend loans to companies with exceedingly high debt ratios

(>70%).

C.Theoretically, the debt ratio cannot exceed

70%.

In practice, few creditors would extend loans to companies with exceedingly high debt ratios

(>70%).

D.Theoretically, the debt ratio cannot exceed

90%.

In practice, few creditors would extend loans to companies with exceedingly high debt ratios

(>70%).