Foundations Of Finance
Foundations Of Finance
10th Edition
ISBN: 9780134897264
Author: KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher: Pearson,
bartleby

Videos

Question
Book Icon
Chapter 12, Problem 1RQ
Summary Introduction

To discuss: The amount of increase of Company A’s debt to total asset ratio by issuing new bond.

Expert Solution & Answer
Check Mark

Explanation of Solution

The common indicator of the use of borrowed funds and financial leverage of a firm is debt to total asset ratio.

In the year 2011, company A had $65 billion in borrowed funds relative to $270 billion in assets. This generates debt to total assets ratio of 24%. The additional borrowing of $3 billion in the year 2012 will increase the total borrowings to $68 billion.

It is to be noticed that company A did not paid any debt in the year 2011. Then the total asset will increase to $273 billion and the debt to total asset ratio of the firm will rise to 24.9% for an increase of marginally less than 1%.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
In March 2016, NuVasive, a medical device company, raised $634 million of 2.25% convertible senior notes due 2021.  The company’s stock price was $45.15 at the time. The conversion rate is 16.7158 shares per $1000 bond.  Calculate the conversion price in dollars and the premium as a percentage.   Then discuss reasons that explain the size of the premium.  Also explain why NuVasive decided to issue convertible bonds instead of regular bonds.
SHOW YOUR SOLUTION IN GOOD ACCOUNTING FORM!!
please, assist me with solving the problem attached, I am particularly interested in solving 3 and 4.   Thank you, Milena
Knowledge Booster
Background pattern image
Finance
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
Corporate Fin Focused Approach
Finance
ISBN:9781285660516
Author:EHRHARDT
Publisher:Cengage
Text book image
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Text book image
Financial Management: Theory & Practice
Finance
ISBN:9781337909730
Author:Brigham
Publisher:Cengage
Financial instruments products; Author: fi-compass;https://www.youtube.com/watch?v=gvxozM3TUIg;License: Standard Youtube License