Week 5 Homework
Chapter 18 Questions
Two companies, Energen and Hastings Corporation, began operations with identical
A year later, both required additional fixed assets at a cost of $50,000.
Energen obtained a 5-year, $50,000 loan at an 8% interest rate from its bank.
the other hand, decided to lease the required $50,000 capacity for 5 years, and an 8%
return was built into the lease.
The balance sheet for each company, before the asset
Total Claims $150,000
Show the balance sheets for both firms after the asset increases, and calculate each
firm’s new debt ratio.
(Assume that the lease is not capitalized.)
Energen Balance Sheet
Debt:Assets = 50%
Hastings Corporation Balance Sheet