Ruskin has the following balance sheet:
Current assets $30,000,000, Current liabilities $10,000,000,
Fixed assets 60,000,000, Long-term debt 25,000,000, Common stock (1
million shares) 1,000,000, Retained earnings 39,000,000, Preferred
Stock 15,000,000, Total assets $90,000,000, Total claims
$90,000,000.
The current liabilities consist entirely of notes payable to
banks, and the interest rate on this debt is 10%, the same as the
rate on new bank loans. These bank loans are not used for seasonal
financing but instead are part of the company’s...