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

jeff jeffy answered 1 year ago

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