Question

In: Finance

Tiggie's Dog Toys, Inc., reported a debt-to-equity ratio of 1.25 times at the end of 2015....

Tiggie's Dog Toys, Inc., reported a debt-to-equity ratio of 1.25 times at the end of 2015. The firm's total assets at year-end were $27.90 million.

How much of their assets are financed with debt and how much with equity? (Do not round intermediate calculations. Enter your answer in millions of dollars rounded to 2 decimal places.)

Solutions

Expert Solution

Debt + Equity = Total Assets
Debt to Equity ratio =Debt / Equity = 1.25
Assume total Equity = X
than total Debt = 1.25 X
Total Value of the Debt and Equity = X + 1.25 X = $ 27.90 Million
Total Value of the Debt and Equity =              2.25 X = $ 27.90 Million
                                                                        =              2.25 X = $ 27.90 Million
                    X     = $ 27.90 / 2.25
                    X     = $ 12.40
So, Equity = $ 12.40
And Debt = $ 12.40 X 1.25 = $ 15.50
Total = $ 12.40 + $ 15.50 =$ 27.90

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