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 $440 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 $556 million, a cash balance of $100 million, and shareholders' equity of $800 million. Determine whether Ferguson Theatres Inc. could borrow $440 million and remain in compliance with the bank covenants. (Round debt to equity ratio to 2 decimal places, eg. 1.25 and net debt as a percentage of total capitalization to O decimal places, e.g. 35%.)

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 $440 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 $556 million, a cash balance of $100 million, and shareholders' equity of $800 million. Determine whether Ferguson Theatres Inc. could borrow $440 million and remain in compliance with the bank covenants. (Round debt to equity ratio to 2 decimal places, eg. 1.25 and net debt as a percentage of total capitalization to O decimal places, e.g. 35%.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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