Your firm has tangible assets of $101.6 million. You are planning to acquire a firm that...

 

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Your firm has tangible assets of $101.6 million. You are planning to acquire a firm that is half your firm's size. You have bonds with a merger & acquisition covenant that requires the combined firm to have a minimum ratio of net tangible assets to debt of 1.55. Your firm has a ratio of 1.9 and the target firm has a ratio of 1.2. Can you take on any more debt in the acquisition and not violate your covenant? The combined company take on more debt. (Select from the drop-down menu.) Your firm has tangible assets of $101.6 million. You are planning to acquire a firm that is half your firm's size. You have bonds with a merger & acquisition covenant that requires the combined firm to have a minimum ratio of net tangible assets to debt of 1.55. Your firm has a ratio of 1.9 and the target firm has a ratio of 1.2. Can you take on any more debt in the acquisition and not violate your covenant? The combined company take on more debt. (Select from the drop-down menu.)

Answer rating: 100% (QA)

To determine if you can take on more debt without violating the covenant lets calculate the n... View the full answer