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    Debt Ration and Financial Risk

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    Suncoast Healthcare is planning to acquire a new x-ray machine that costs $200,000. The business can either lease the machine using an operating lease or buy it using a loan from a local bank. Suncoast's balance sheet prior to acquiring the machine is as follows:

    Current assets : $100,000
    Debt : $400,000
    Net fixed assets : $900,000
    Equity : $600,000
    Total assets : $1,000,000
    Total claims : $1,000,000

    a. What is Suncoast's current debt ratio?
    b. What would the new debt ratio be if the machine were leased? If it is purchased?
    c. Is the financial risk of the business different under the two acquisition alternatives?

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    https://brainmass.com/business/leasing/debt-ration-and-financial-risk-501582

    Solution Preview

    a. What is Suncoast's current debt ratio?
    Debt ratio= Total debt/Total Assets
    =400000/ 1000000
    =40%.

    b. What would the new debt ratio be if the machine were ...

    $2.49

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