Currently, Chester's leverage ratio is 1.82. Next round, Chester wants to ensure it gets full balance scorecard points for leverage by increasing its leverage ratio to 2.0. The company also needs to increase automation and it plans to fund this capital expenditure by issuing bonds. Looking at the industry balance sheets, assuming no other changes besides investing in automation, in order for Chester to increase its leverage to 2.0 by issuing bonds (both cash and debt increase, but equity remains the same on the balance sheet) and purchasing plant and equipment (cash decreases, equipment increases but equity remains the same on the balance sheet), which of the following actions would help Chester increase its leverage ratio to 2.0?

Group of answer choices

Issue Bonds of $2M and Invest $2M in automation.

Issue Bonds of $4M and Invest $4M in automation.

Issue Bonds of $6M and Invest $6M in automation.

Issue Bonds of $10M and Invest $10M in automation.

Answer rating: 100% (QA)

To increase the leverage ratio Chester needs to issue bonds and invest in automation wi... View the full answer