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18 December, 11:23

Neal enterprises has no debt. its current total value is $45 million. assume the company sells $16 million in debt. requirement 1: ignoring taxes, what is the debt-equity ratio

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  1. 18 December, 12:31
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    Total value of company before issue of debt = 45 Million

    Since there was no debt, all of this capital is equity capital.

    Therefore, equity capital = 45 Million

    Debt capital raised = 16 Million

    The debt to equity ratio = total debt/total equity

    Debt to equity ratio = 16/45 = 0.3556
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