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effects of financing decisions assume masimo corporation, a medical technology company, has total assets of $3,500,000 and total liabilities of $3,000,000. masimo is considering two alternatives for acquiring additional ware-house space. under the first alternative, the building would be purchased for $200,000 and financed by issuing long-term bonds. under the second alternative, the building would be rented with an annual lease cost of $20,000 per year. round answers to one decimal place, if applicable. a. compute the company's current debt-to-equity ratio.

Answer :

The cost of an asset can be amortized over the course of its useful life:

The straight-line method's annual amortization is calculated as follows: = (Cost of asset - Residual value) / Useful life. We will infer there is no residual value because it is not specified.

The debt-to-equity (D/E) ratio, which measures a company's financial leverage Cost, is determined by dividing its total liabilities by the value of its shareholders.  A debt-to-equity ratio of roughly 2 or 2.5 is generally seen as good, though it differs by industry. The debt-to-equity (D/E) ratio demonstrates how much equity and debt are being used by a company to finance its assets.

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