Question: HG Lang is planning to open a new store in

HG Lang is planning to open a new store in Miami that will be financed in part by a new bank loan of $1,500,000.

HG Lang Designs operates an exclusive bridal boutique in Manhattan. All gowns are designed by Lang but are manufactured by various small firms in France and Italy. The following financial information for the company relates.

HG Lang Designs
Income Statements

a. Assuming debt was $1,500,000 higher in 2012, what would the debt-to-equity ratio have been?
b. Assume that the additional debt will add $110,000 of interest expense. What would times interest earned have been in 2012 if interest expense had been $110,000 higher?
c. Assume you are a bank manager evaluating the potential $1,500,000 loan to HG Lang.
Explain why you would or would not be favorably inclined to make theloan.

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  • CreatedSeptember 23, 2013
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