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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
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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Current Attempt in Progress 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%) Debt to Equity Net Debt as a Percentage of Total Capitalization Ferguson Theatres borrow $440 Million. eTextbook and Media. Save for Later :1 % Attempts: 1 of 3 used Submit Answer
Transcribed Image Text:Current Attempt in Progress 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%) Debt to Equity Net Debt as a Percentage of Total Capitalization Ferguson Theatres borrow $440 Million. eTextbook and Media. Save for Later :1 % Attempts: 1 of 3 used Submit Answer
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