History Bookmarks Window Help ezto.mheducation.com Chapter 10-MC & Probs $6,000
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History Bookmarks Window Help ezto.mheducation.com Chapter 10-MC & Probs $6,000 74,000 Noncurrent liabilities54,000 32,000 $18,000 Current liabilitios Current assets Noncurrent assets Stockholders' equity The company wishes to raise $34,000 in cash and is considering two financing options: CSC can sell $34,000 of bonds payable, or it can issue additional common stock for $34,000. To help in the decision to assets ratio Required ss, CSC's management wants to determine the effects of each alternative on its current ratio and debt a-1. Compute the current ratio for CSC's management. (Round your answers to 2 decimal places.) Current Ratio Currently If bonds are issued If stock is issued to 1 to 1 to 1 Compute the debt to assets ratio for CSC's management. (Round your answers to 1 decimal place.) a-2. Debt to Assets Ratio Currently If bonds are issued If stock is issued b. Assume that after the funds are invested, EBIT amounts to $14,400. Also assume the company pays $3,700 in dividends or $3,700 percent tax rate, determine the amount of the increasei financing option. in interest depending on which source of financing is used. Based on'a 30 iretained earnings that would result under each Additional Retained Earnings Bonds StockExplanation / Answer
a-1) Current ratio = Current assets / Current liabilities Current ratio Currently (18000/6000) 3 If bonds are issued ((18000+34000)/6000) 8.67 If stock is issued ((18000+34000)/6000) 8.67 a-2) Debt to asset ratio Currently (54000/(18000+74000)) 0.59 If bonds are issued ((54000+34000)/(18000+74000+34000)) 0.70 If stock is issued (54000/(18000+74000+34000)) 0.43 b) Additional retained earnings Bonds ((14400-3700)*70%) 7490 Stocks (14400*70%-3700) 6380
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