Question: Coney Island enters into a lease agreement for a new ride valued at $2 million. Prior to this agreement, the companys total assets are $25

Coney Island enters into a lease agreement for a new ride valued at $2 million. Prior to this agreement, the company’s total assets are $25 million and its total liabilities are $15 million.

Required:
1. Calculate total stockholders’ equity prior to the lease agreement.
2. Assuming an operating lease, calculate the debt to equity ratio.
3. Assuming a capital lease, calculate the debt to equity ratio.
4. Why might Coney Island prefer an operating lease?

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