Homework Answers
EBIT = [Net Income / (1 - t)] + Interest
= [40 / (1 - 0.36)] + 15 = 62.5 + 15 = $77.5 million
Times Burden Covered Ratio = EBIT/ [Interest + {Principal Repayment/(1 - tax rate)}]
= 77.5 / [15 + {14 / (1 - 0.36)}] = 77.5 / [15 + 21.875] = 77.5 / 36.875 = 2.10
Hence, 5th option is correct.
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