Louisiana State University, Shreveport ACC ACC 701 ABC Inc. was incorporated two years ago by issuing 5,000 shares of common stock at $400 each and borrowing $240,000 from a bank on a long-term note.
On December 31, 2017, Johnson Inc. has total liabilities of $520,000 and total equity of $446,000. The company needs to raise additional funds through debt and equity. The company will issue 1,000 shares of common stock at $9 per share and in addition it intends to borrow as much as it can from Bank of Morganville. Bank of Morganville requires a maximum debt-to-asset ratio of 0.8.
What is the maximum additional amount that Johnson Inc. can borrow after the additional stock is issued?
d. $0 (the company already exceeds the 0.8 debt-to-asset ratio)
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