Clayton Industries has the following account balances.

Current assets $ $25,000$ Current liabilities $ $13,000$

Noncurrent assets $87,000$ Noncurrent liabilities $53,000$

Stockholders$$ equity $46,000$

The company wishes to raise $$49,000$ in cash and is considering two financing options: Clayton can sell $$49,000$ of bonds payable, or it can issue additional common stock for $$49,000.$ To help in the decision process, Clayton$$s management wants to determine the effects of each alternative on its current ratio and debt$-$to$-$assets ratio.

Required

a$-1.$ Compute the current ratio for Clayton$$s management.

a$-2.$ Compute the debt$-$to$-$assets ratio for Clayton$$s management.

b$.$ Assume that after the funds are invested, EBIT amounts to $$17,500.$ Also assume the company pays $$3,400$ in dividends or $$3,400$ in interest depending on which source of financing is used. Based on a $30$ percent tax rate, determine the amount of the increase in retained earnings that would result under each financing option.