The present capital structure of jones corporation is shown

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The present capital structure of Jones Corporation is shown below.

Debentures

$1,200,000

Collateral bonds

2,800,000

Preferred stock

700,000

Common stock

2,600,000

Total

$7,300,000

There is a high financial leverage position:

Debt/Equity=$4,000,000/$3,300,000=1.21

The business is worth $4.7 million as a going concern. The trustee has formulated a less leveraged capital structure having a total capital of $4.7 million as follows:

Debentures

$ 800,000

Collateral bonds

1,500,000

Income bonds

1,300,000

Preferred stock

400,000

Common stock

700,000

Total

$4,700,000

What is the new debt/equity ratio?

Reference no: EM13484643

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