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20 October, 19:36

Kaye's Kitchenware has a market/book ratio equal to 1. Its stock price is $15 per share and it has 4.7 million shares outstanding. The firm's total capital is $110 million and it finances with only debt and common equity. What is its debt-to-capital ratio

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  1. 20 October, 20:53
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    35.91%

    Explanation:

    The formula and the computation of the debt to capital ratio is shown below:

    The debt to capital ratio equals to

    = (Debt : total invested capital) * 100

    where,

    Debt = Total capital - stock price * number of shares outstanding

    = $110 million - $15 * 4.7 million shares

    = $110 - $70.5 million

    = $39.5 million

    And, the total invested capital is $110 million

    So, the debt to equity ratio is

    = $39.5 million : $110 million

    = 35.91%
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