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Answer:
Answer to Part a)
Debt to Asset Ratio = Total Liabilities / Total Assets
Assets = Total Liabilities + Equity fund
Therefore, total assets = $ 6,834,000
Total Liabilities = Total Assets - Common Equity
Total Liabilities =$ 6,834,000– 4,947,000
Total Liabilities = $ 1,887,000
Debt to Asset Ratio = Total Liabilities / Total Assets
Debt to Assets Ratio = $ 1,887,000 / $ 6,834,000
Debt to Assets Ratio = 27.61%
Answer to Part b)
Since, the Campbell is planning to purchase a new warehouse using the long term debt for $ 1.2 million, its assets and liabilities will increase by $ 1.2 million
New Assets = $ 6,834,000 + $ 1,200,000 = $ 8,034,000
New Liabilities = $ 1,887,000+ $ 1,200,000 = $ 3,087,000
Debt to Assets Ratio = $ 3,087,000/$ 8,034,000
Debt to Assets Ratio = 38.42%
(Related to Checkpoint 4.2) (Capital structure analysis) The liabilities and owners' equity for Campbell Industries is...
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