The Altman Company Has a Debt-To-Assets Ratio of 33

question 59

Multiple Choice

The Altman Company has a debt-to-assets ratio of 33.33 percent,and it needs to raise $100,000 to expand.Management feels that an optimal debt-to-assets ratio would be 16.67 percent.Sales are currently $750,000,and the total assets turnover is 7.5.How should the expansion be financed so as to produce the desired debt-to-assets ratio?

• A) Finance it all with equity.
• B) Finance it all with debt.
• C) Finance 20% debt,80% equity.
• D) Finance 40% debt,60% equity.
• E) Finance 50% debt,50% equity.

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