Determining the rain corporation current ratio

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Rain Corporation is planning its debt maturity mix. Management has chosen a debt-equity mix consisting of $50,000 of liabilities and $75,000 of owners' equity. The yield curve is currently upward sloping: the interest rate on short-term debt is 7% and the interest rate on long-term debt is 11%. Rain has $60,000 of current assets, anticipates EBIT of $20,000 and has a 30% tax rate.

What will Rain's current ratio be if it makes $15,000 of the liabilities short-term and $35,000 long-term?

Reference no: EM133110113

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