Firm borrow to achieve the target debt ratio


Beranek Corp. has $410,000 of assets, and it uses no debt-it is financed only with common equity. The new CFO wants to employ enough debt to bring the debt/assets ratio to 40%, using the proceeds from the borrowing to buy back common stock at its book value. How much must the firm borrow to achieve the target debt ratio?

a) $155,800

b) $164,000

c) $172,200

d) $180,810

e) $189,851

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Accounting Basics: Firm borrow to achieve the target debt ratio
Reference No:- TGS061753

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