Question

Two public corporations, First Engineering and Midwest Development, each show capitalization of $175 million in their annual reports. The balance sheet for First indicates total debt of $96 million and that of Midwest indicates net worth of $87 million. Determine the D-E mix for each company.

The D-E mix for First Engineering is  % –  %.

The D-E mix for Midwest Development is  % –  %.

Answer 1

	Equity	=	Total assets - Total debt
	Net Worth	=	Total assets - Total debt
	Capital	=	Total Debt + Total Equity
	Total Assets	=	Total Debt + Total Equity
	Now,
				First Engineering		Midwest Development
	Capital			$        175	Million	$        175	Million
	Debt			$          96	Million	$          88	Million
	Equity			$          79	Million	$          87	Million
	Now,
	First Engineering :
	Debt		=	$          96	/	$        175	=	54.86%
	Equity		=	$          79	/	$        175	=	45.14%
	Midwest Development:
	Debt		=	$          88	/	$        175	=	50.29%
	Equity		=	$          87	/	$        175	=	49.71%
	Now,
				Debt		Equity
	First Engineering			54.86%		45.14%
	Midwest Development			50.29%		49.71%