A company having total assets of $2,350,000 and liabilities of $950,000 needed to raise 1,000,000 to purchase some land for expansion. They could either borrow the funds using 20-year bonds or they could issue 100,000 shares of common stock at the estimated market price of $10 per share. What is the debt/equity ratio before any choices are made?
A company having total assets of $2,350,000 and liabilities of $950,000 needed to raise 1,000,000 to purchase some land for expansion. They could either borrow the funds using 20-year bonds or they could issue 100,000 shares of common stock at the estimated market price of $10 per share. What is the debt/equity ratio before any choices are made?
Chapter12: The Cost Of Capital
Section: Chapter Questions
Problem 17P
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