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Lever Age pays an 9% rate of interest on $10.40 million of outstanding debt with face value $10.4 million. The firms EBIT was $1.4 million a. What is its times interest earned? (Round your answer to 2 decimal places.) Times interest earned b. If depreciation is $240,000, what is its cash coverage ratio? (Round your answer to 2 decimal places.) Cash coverage ratio

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Answer #1

a. Interest expense = .09 × $10.40 million = $936,000

Times interest earned = $1,400,000 / $936,000 = 1.50

b. Cash coverage ratio = ($1,400,000 + $240,000) / $936,000 = 1.75

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