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Exercise 10-25A (Algo) Determining the effects of financing alternatives on ratlos LO 10-8 Clayton Industries has the following account balances: Current assets Noncurrent assets $ 26,000 Current liabilities 73,020 Noncurrent liabilities Stockholders' equity $ 7,620 , 32.ee The company wishes to reise $31.000 in cash and is considering two financing options: Clayton can sell $31.000 of bonds payable, or it can issue additional common stock for $31,000. To help in the decision process, Clayton's management wants to determine the effects of esch alternative on its current rstio and debt-to-assets ratio. Required a-1. Compute the current ratio for Clayton's management. (Round your answers to 2 decimal places.) Current Ratio to 1 Currently If bonds are issued If stock is issued ID 1 to 1 a-2. Compute the debt-to-assets ratio for Clayton's management. (Round your answers to 1 decimal place.) Debt to Aasete Ratio % Currently If bonds are issued If stock is issued % % b. Assume that after the funds are invested, EBIT amounts to $13.900. Also assume the company pays $4,200 in dividends or $4.200 in interest depending on which source of financing is used. Based on a 40 percent tax rate, determine the amount of the increase in retained earnings that would result under esch financing option. Additional Retained Earning Bonds Stock

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