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Excel Online Structured Activity: TIE ratio MPI Incorporated has $5 billion in assets, and its tax rate is 35% Its basic earn
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Answer #1

EBIT =Basic Earning Power *Total Assets =9%*5000000000=450,000,000
EAT =ROA*Total Assets =5%*5000000000=250,000,000
(EBIT-Interest)*(1-Tax Rate) =EAT
Interest =EBIT-EAT/(1-Tax Rate)=450,000,000-250,000,000/65% =65,384,615.38

TIE -EBIT/Interest =450,000,000/65,384,615.38=6.88

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