Question: You are analyzing the leverage of two firms and you note the following (all values in millions of dollars): Debt Book Equity Market Equity Operating

You are analyzing the leverage of two firms and you note the following (all values in millions of dollars):

Debt

Book Equity

Market Equity

Operating Income

Interest Expense

Firm A

495.4

303.7

397.1

104.8

49.3

Firm B

80.1

30.5

42.5

7.8

6.9

a. What is the market debt-to-equity ratio of each firm?

b. What is the book debt-to-equity ratio of each firm?

c. What is the EBIT/interest coverage ratio of each firm?

d. Which firm may have more difficulty meeting its debt obligations? Explain.

a. What is the market debt-to-equity ratio of each firm?

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