You are considering a stock investment in one of two firms (LotsofDebt, Inc and

Question

You are considering a stock investment in one of two firms (LotsofDebt, Inc and LotsofEquity, Inc.), both of which operate in the same industry. LotsofDebt, Inc finances its $32.00 million in assets with $30. 00 million in debt and $2. 00 million in equity LotsofEquity, Inc finances its $32. 00 million in assets with $2. 00 million in debt and $30. 00 million in equity. Calculate the debt ratio (Round your answers to 2 decimal places.) Calculate the equity multiplier (Round your answers to 2 decimal places.) Calculate the debt-to-equity (Round your answers to 2 decimal places.)

Explanation / Answer

Amt $ Million Details Lots Of Debt Inc. Lots of Equity Inc. Assets                               32.00                           32.00 Debt Value                             30.00                             2.00 Equity                                 2.00                           30.00 Debt Ratio= Debt/Total Assets= 93.75% 6.25% Equity Multiplier =Total Assets/Equity=                             16.00                             1.07 Times Debt to Equity =                             15.00                             0.07 Times

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