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Fessenden Corporation has accumulated a significant amount of debt as a result of debt-financed acquisitions of other companies. It is currenthy considering acquiring one of its competitors, Sonar Corpocation. Fessenden's existing debt covenants stipulate that it cannot go beyond a debt to equity ratio of 1.25:1 and a net debt as a percentage of capitalization ratio of 0.90:1. The acquisition of Sonar will cost $86 million. Fessenden's current level of equity is $440 million and its current level of interest-bearing debt is $605 million. Fessenden has a cash balance of $77 milion. 1t will finance the acquaition with a 10 -year bond of $86 million that carries a 5% interest rate sold at par. Part 1 Determine Fessenden's debt to equity ratio and net debt as a percintage of capitalization ratio prior to the proposed acquasition. (Round onswers to 2 decimal ploces es 125 ) Debt to Equity Net Debt as a Percentage of Total Capitalivation Determine whether Fessenden could acquire Sonar Corporation with the bond issue and still remain in compliance with the existing debt covenants, (Round answers to 2 decimal places, es. 1.25) Debt to Equity Net Debt as a Percentage of TotalCapitalization 4 Fessenden acquire Sonar Corporation. Attempts: 0 of 3 used

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