Brookman Inc's latest EPS was $2.75, its book value per share was $22.75, it had 275,000 shares outstanding, and its debt/total invested capital ratio was 44%. The firm finances using only debt and common equity, and its total assets equal total invested capital. How much debt was outstanding? Do not round your intermediate calculations. a. $5,013,938 b. $4,571,531 c. $5,358,031 d. $4,915,625 e. $4,768,156

Outstanding debt = $4,915,625

Explanation:

Since the debt capital ratio 44%, then the equity / capital ratio is 56% i. e (100% - 44%)

The total value of stock = Book value per share * outstanding capital

= $22.75 * 275,000 = $6,256,250.

The total value of equity = 56% * total value of assets

$6,256,250. = 56% * y

6,256,250/56% = y

11,171,875 = y

Total value of assets = $11,171,875

Debt outstanding = debt/capital ratio * Assets

= 44% * $11,171,875

= $4,915,625