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 $32.50 million in assets with $30.25 million in debt and $2.25 million in equity. LotsofEquity, Inc. finances its $32.50 million in assets with $2.25 million in debt and $30.25 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.)

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Asked Oct 8, 2019
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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 $32.50 million in assets with $30.25 million in debt and $2.25 million in equity. LotsofEquity, Inc. finances its $32.50 million in assets with $2.25 million in debt and $30.25 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.)

 

 

 

 

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Expert Answer

Step 1

Please see the white board wwhere I have summarized the information...

LotsofDebt Inc.LotsofEquity Inc
Linkage
Parameter
32.50
32.50
Assets
A
Debt
30.25
D
2.25
Equity
2.25
30.25
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LotsofDebt Inc.LotsofEquity Inc Linkage Parameter 32.50 32.50 Assets A Debt 30.25 D 2.25 Equity 2.25 30.25

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