Green Grasshopper Incorporated is interested in assessing the following scenarios on its indicators of liquidity, solvency, and profitability. Solve each scenario independently.
a. Green Grasshopper’s debt- to- equity ratio is 40%. It is considering issuing $ 13 million in bonds that would increase its total liabilities to $ 68 million. What would Green Grasshopper’s debt- to- equity ratio be if it issued the bonds?
b. Green Grasshopper’s current ratio is 1.45. It is considering issuing $ 30 million in bonds to purchase a new manufacturing facility. Its current liabilities are $ 28 million but the new debt would increase the current portion of its long- term debt payable by $ 3.2 million. What would Green Grasshopper’s current ratio be if it issued the bonds and used the proceeds to purchase the facility?