Merrimac Brewing company's total assets equal $18 million.The book value of Merrimac's equity is $6 million.The market value of Merrimac's equity is $10 million.It's Debt to Value ratio is .5.What is Merrimac's Debt Ratio?

Question

Quizplus · Accepted Answer

First, let's find the total debt of Merrimac Brewing company:

Debt to Value ratio = Total Debt / Total Assets - Equity

0.5 = Total Debt / (18 - 6)

0.5 = Total Debt / 12

Total Debt = 0.5 x 12 = 6

Now, we can find the Debt Ratio:

Debt Ratio = Total Debt / Total Assets

Debt Ratio = 6 / 18

Debt Ratio = 0.33

Therefore, the answer is B (0.33).

Merrimac Brewing Company's Total Assets Equal $18 Million