Study Problems

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Capital Structure Policies

  1. 15–1. (Calculating debt ratio) (Related to Checkpoint 15.1 on page 502) Webb Solutions, Inc., has the following financial structure:

    Accounts payable $  500,000
      Short-term debt   250,000
    Current liabilities $  750,000
      Long-term debt   750,000
    Shareholders’ equity   500,000
    Total $2,000,000

    1. Compute Webb’s debt ratio and interest-bearing debt ratio.

    2. If the market value of Webb’s equity is ...

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