. The debt ratio (debt/value) is.80. Total assets are $10 million. Find equity. Find the debt-equity...

Question

Question

Answer 1

Answer #1

a.Debt ratio=Debt/Total assets

Hence debt=(0.8*10)=$8 million

Total assets=debt+equity

Hence equity=(10-8)=$2million

Debt to equity ratio=Debt/equity

=(8/2)=4

b.Debt/equity ratio=Debt/equity

Hence debt=3equity

Total assets=Debt+Equity

Hence 10=3equity+equity

Hence equity=10/(3+1)=$2.5million

Hence debt=(3*2.5)=$7.5million

Hence debt/value ratio=(7.5/10)=0.75

Answer 2

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