Some Examples of Ideal Debt Ratios*
This appendix will help to frame the concept of optimal by sketching out what a number of different optimal debt ratios look like in practice. Since some of these materials are a bit more advanced, we will use the same format we used at the end of Chapter 5, which is to lay out two balance sheets in a side-by-side comparison. We will start out with a review of a case study from Chapter 5 and then continue on to increasingly more advanced scenarios and concepts.
(This is the same scenario for Jane earlier reviewed in Chapter 5.)
In the optimal scenario, on the right of Table D.1, Jane
If Jane reinvests the additional $16,000 at the same 6 percent for five years, she will generate a total of approximately $90,000 in additional value versus the no-debt scenario on the left.
Looking forward: ...