Ferguson Theatres Inc. operates specialty film format theatres that display images of greater size and higher quality resolution. Ferguson is considering expanding its theatres in China and needs to raise $475 million in additional debt. However, the company is concerned about remaining compliant with its existing debt to equity ratio covenant of 1.10:1 and the net debt as a percentage of capitalization ratio of 50%. For the fiscal year ended December 31, 2020, an extract of the statement of financial position for Ferguson Theatres showed the following information: total interest-bearing debt of $650 million, a cash balance of $100 million, and shareholders’ equity of $900 million.

Required

Determine whether Ferguson Theatres Inc. could borrow $475 million and remain in compliance with the bank covenants.