Ferguson Theatres Inc. operates specialty film format theatres that display images of greater size and higher quality resolution. Ferguson is considering expanding its theatres in China and needs to raise $433 million in additional debt. However, the company is concerned about remaining compliant with its existing debt to equity ratio covenant of 1.10:1 and the net debt as a percentage of capitalization ratio of 50%. For the fiscal year ended December 31, 2020, an extract of the statement of financial position for Ferguson Theatres showed the following information: total interest-bearing debt of $837 million, a cash balance of $100 million, and shareholders' equity of $1,000 million. Determine whether Ferguson Theatres Inc. could borrow $433 million and remain in compliance with the bank covenants. (Round debt to equity ratio to 2 decimal places, e.g. 1.25 and net debt as a percentage of total capitalization to O decimal places, e.g. 35%.) Debt to Equity Net Debt as a Percentage of Total Capitalization Ferguson Theatres borrow $433 Million. :1 %
Ferguson Theatres Inc. operates specialty film format theatres that display images of greater size and higher quality resolution. Ferguson is considering expanding its theatres in China and needs to raise $433 million in additional debt. However, the company is concerned about remaining compliant with its existing debt to equity ratio covenant of 1.10:1 and the net debt as a percentage of capitalization ratio of 50%. For the fiscal year ended December 31, 2020, an extract of the statement of financial position for Ferguson Theatres showed the following information: total interest-bearing debt of $837 million, a cash balance of $100 million, and shareholders' equity of $1,000 million. Determine whether Ferguson Theatres Inc. could borrow $433 million and remain in compliance with the bank covenants. (Round debt to equity ratio to 2 decimal places, e.g. 1.25 and net debt as a percentage of total capitalization to O decimal places, e.g. 35%.) Debt to Equity Net Debt as a Percentage of Total Capitalization Ferguson Theatres borrow $433 Million. :1 %
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Vikrambahi
Transcribed Image Text:Ferguson Theatres Inc. operates specialty film format theatres that display images of greater size and higher quality resolution.
Ferguson is considering expanding its theatres in China and needs to raise $433 million in additional debt. However, the company is
concerned about remaining compliant with its existing debt to equity ratio covenant of 1.10:1 and the net debt as a percentage of
capitalization ratio of 50%. For the fiscal year ended December 31, 2020, an extract of the statement of financial position for Ferguson
Theatres showed the following information: total interest-bearing debt of $837 million, a cash balance of $100 million, and
shareholders' equity of $1,000 million.
Determine whether Ferguson Theatres Inc. could borrow $433 million and remain in compliance with the bank covenants. (Round debt
to equity ratio to 2 decimal places, e.g. 1.25 and net debt as a percentage of total capitalization to O decimal places, e.g. 35%.)
Debt to Equity
Net Debt as a Percentage of Total Capitalization
Ferguson Theatres
borrow $433 Million.
:1
%
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