help Accounts payable $107,000 n- Short- term debt 403,000 Current liabilities $
ID: 2743157 • Letter: H
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Accounts payable $107,000 n- Short- term debt 403,000 Current liabilities $510,000 Long-term debt 2, 140,000 Owner's equity 1, 569,000 Total $4, 219,000 (Adjusting a firm's capital structure) Curley's Fried Chicken Kitchen operates two southern cooking restaurants in St. Louis, Missouri, and has the following financial structure: gg. The firm is considering an expansion that would involve raising an additional $2.4 million. What are the firm's debt ratio and interest-bearing debt ratio in its present capital structure? If the firm wants to have a debt ratio of 50 percent, how much equity does the firm need to raise in order to finance the expansion? The firm's debt ratio is 62.8 %. (Round to one decimal place.) The firm's interest-bearing debt ratio is 60.3 %. (Round to one decimal place.) If the firm wants to have a debt ratio of 50%, the equity the firm needs to raise is $ 1560500. (Round to the nearest dollar.)Explanation / Answer
a. Debt Ratio = Total Debt / Total Assets
= 2140000 / 4219000 * 100 = 50.72%
Interest Bearing Ratio = Interest Bearing Debt / Equity
= 2140000 / 1569000 = 1.36 times
b. For debt Ratio to be 50%:
2140000 / Total Assets * 100 = 50%
Total Assets = $4280000
Equity would be $4280000 - $510000 - $2140000
= $1630000
Additional Equity to be raised = $1630000 - $1569000
= $61000
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