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1)-4): Vanlu Construction needs a piece of equipment that costs $200. Vanlu can either lease the equipment or borrow $200 from a local bank
N
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and buy the equipment. If the equipment is leased, the lease would not have to be capitalized. Vanlu's balance sheet prior to the acquisition of
the equipment is given in the table below.
VOUT A
Current assets
$400
Debt
$300
Net fixed assets
$400
Equity
$500
|00
Total assets
$800
Total claims
$800
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1) What is Vanlu's current debt ratio (i.e., debt-to-assets ratio)?
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Il.Cash Budget_DSO_TradeCredit
Ill.Credit Policy_Effective Int
IV. Vanlu Construction
V. Urbar ... + 4
D
+
120%
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M08_Assignment last first name_ - EX...
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11
=
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B
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U ~ A
A
E
$
v
%
Format as Table
Cells
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Paste
A
.00
Cell Styles
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K20
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TA
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2) What would be the company's debt ratio if it purchased the equipment?
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3) What would be the debt ratio if the equipment were leased?
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4) Would the company's financial risk be different under the leasing and purchasing
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alternatives?
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4
...
Il.Cash Budget_DSO_TradeCredit
Ill.Credit Policy_Effective Int
IV. Vanlu Construction
V. Urbar ... +
+
90%
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12/11/2019

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