You are analyzing the leverage of two firms and you note the following (all values in millions of dollars): a. What is the market debt-to-equity ratio of each firm? b. What is the book debt-to-equity ratio of each firm? c. What is the interest coverage ratio of each firm? d. Which firm will have more difficulty meeting its debt obligations? a. What is the market debt-to-equity ratio of each firm? The market debt-to-equity ratio for Firm A is enter your response here . (Round to two decimal places.) Part 2 The market debt-to-equity ratio for Firm B is enter your response here . (Round to two decimal places.) Part 3 b. What is the book debt-to-equity ratio of each firm? The book debt-to-equity ratio for Firm A is enter your response here . (Round to two decimal places.) The book debt-to-equity ratio for Firm B is enter your response here . (Round to two decimal places.) Part 5 c. What is the interest coverage ratio of each firm? The interest coverage ratio for Firm A is enter your response here . (Round to two decimal places.) The interest coverage ratio for Firm B is enter your response here . (Round to two decimal places.) Part 7 d. Which firm will have more difficulty meeting its debt obligations? (Select from the drop-down menu.) will have more difficulty meeting its debt obligations.
You are analyzing the leverage of two firms and you note the following (all values in millions of dollars): a. What is the market debt-to-equity ratio of each firm? b. What is the book debt-to-equity ratio of each firm? c. What is the interest coverage ratio of each firm? d. Which firm will have more difficulty meeting its debt obligations? a. What is the market debt-to-equity ratio of each firm? The market debt-to-equity ratio for Firm A is enter your response here . (Round to two decimal places.) Part 2 The market debt-to-equity ratio for Firm B is enter your response here . (Round to two decimal places.) Part 3 b. What is the book debt-to-equity ratio of each firm? The book debt-to-equity ratio for Firm A is enter your response here . (Round to two decimal places.) The book debt-to-equity ratio for Firm B is enter your response here . (Round to two decimal places.) Part 5 c. What is the interest coverage ratio of each firm? The interest coverage ratio for Firm A is enter your response here . (Round to two decimal places.) The interest coverage ratio for Firm B is enter your response here . (Round to two decimal places.) Part 7 d. Which firm will have more difficulty meeting its debt obligations? (Select from the drop-down menu.) will have more difficulty meeting its debt obligations.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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You are analyzing the leverage of two firms and you note the following (all values in millions of dollars):
a. What is the market debt-to-equity ratio of each firm?
b. What is the book debt-to-equity ratio of each firm?
c. What is the interest coverage ratio of each firm?
d. Which firm will have more difficulty meeting its debt obligations?
a. What is the market debt-to-equity ratio of each firm?
The market debt-to-equity ratio for Firm A is enter your response here
. (Round to two decimal places.)
Part 2
The market debt-to-equity ratio for Firm B is enter your response here
. (Round to two decimal places.)
Part 3
b. What is the book debt-to-equity ratio of each firm?
The book debt-to-equity ratio for Firm A is enter your response here
. (Round to two decimal places.)
The book debt-to-equity ratio for Firm B is enter your response here
. (Round to two decimal places.)
Part 5
c. What is the interest coverage ratio of each firm?
The interest coverage ratio for Firm A is enter your response here
. (Round to two decimal places.)
The interest coverage ratio for Firm B is enter your response here
. (Round to two decimal places.)
Part 7
d. Which firm will have more difficulty meeting its debt obligations? (Select from the drop-down menu.)
will have more difficulty meeting its debt obligations.
Transcribed Image Text:You are analyzing the leverage of two firms and you note the following (all values in millions of dollars):
Debt
Book Equity
Market Equity
Operating Income
Interest Expense
Firm A
495.2
300.6
395.5
99.7
51.4
Firm B
80.5
36.1
38.1
8.2
7.5
a. What is the market debt-to-equity ratio of each firm?
b. What is the book debt-to-equity ratio of each firm?
c. What is the interest coverage ratio of each firm?
d. Which firm will have more difficulty meeting its debt obligations?
a. What is the market debt-to-equity ratio of each firm?
The market debt-to-equity ratio for Firm A is
(Round to two decimal places.)
The market debt-to-equity ratio for Firm B is
(Round to two decimal places.)
b. What is the book debt-to-equity ratio of each firm?
The book debt-to-equity ratio for Firm A is
(Round to two decimal places.)
The book debt-to-equity ratio for Firm B is
and t
(Round to two decimal places.)
c. What is the interest coverage ratio of each firm?
The interest coverage ratio for Firm A is
(Round to two decimal places.)
The interest coverage ratio for Firm B is
(Round to two decimal places.)
pund t
d. Which firm will have more difficulty meeting its debt obligations? (Select from the drop-down menu.)
V will have more difficulty meeting its debt obligations.
Expert Solution
Step 1
Market Debt to Equity Ratio = Debt /Market value of Equity
Book Debt to Equity Ratio = Debt /Book value of Equity
Interest Coverage Ratio = EBIT (Earning before Interest and Tax or Say Operating Income) Interest Expense
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