ZuoTi.Pro
Question

Tie and Roic Ratios The H.R. Pickett Corp. has $800,000 of interest-bearing debt outstanding, and it pays an annual interest rate of 10%. In addition, it has $800,000 of common stock on its balance sheet. It finances with only debt and common equity, so it has no preferred stock. Its annual sales are $2.88 million, its average tax rate | is 30%, and its profit margin is 3%, what are its TIE ratio and its return on invested capital (ROIC)? Round your answers to two decimal places TIE ROIC

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Interest= 800000*.10=80000

Net income =2880000*.03=86400

Income before tax =net income/(1-tax rate)

= 86400/(1-.30)

= 123428.57

  

A) TIE = (income before tax + interest) /interest

(123428.57+80000)/80000

203428.57/80000

2.54

B) ROIC = Net income/total invested capital

86400/1600000

.054 or 5.4%

0 0
Add a comment
Know the answer?
Add Answer to:
Tie and Roic Ratios The H.R. Pickett Corp. has $800,000 of interest-bearing debt outstanding, and it...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • The W.C. Pruett Corp. has $750,000 of interest-bearing debt outstanding, and it pays an annual interest...

    The W.C. Pruett Corp. has $750,000 of interest-bearing debt outstanding, and it pays an annual interest rate of 8%. In addition, it has $800,000 of common stock on its balance sheet. It finances with only debt and common equity, so it has no preferred stock. Its annual sales are $2.85 million, its average tax rate is 35%, and its profit margin is 4%. What are its TIE ratio and its return on invested capital (ROIC)? Round your answers to two...

  • E eBook Problem Walk-Through The W.C. Pruett Corp. has $700,000 of interest-bearing debt outstanding, and it...

    E eBook Problem Walk-Through The W.C. Pruett Corp. has $700,000 of interest-bearing debt outstanding, and it pays an annual interest rate of 7%. In addition, it has $800,000 of common stock on its balance sheet. It finances with only debt and common equity, so it has no preferred stock. Its annual sales are $2.94 million, its average tax rate is 25%, and its profit margin is 6%. What are its TIE ratio and its return on invested capital (ROIC)? Round...

  • Problem 4.13 Question 11 of 14 Check My Work (No more tries available) Click here to...

    Problem 4.13 Question 11 of 14 Check My Work (No more tries available) Click here to read the eBook: Debt Management Ratios TIE AND ROIC RATIOS The W.C. Pruett Corp. has $800,000 of interest-bearing debt outstanding, and it pays an annual interest rate of 9%. In addition, it has $600,000 of common stock on its balance sheet. It finances with only debt and common equity, so it has no preferred stock. Its annual sales are $2 million, its average tax...

  • The Tarpon Corp has $200,000 of debt outstanding, and it pays an interest rate of 8%...

    The Tarpon Corp has $200,000 of debt outstanding, and it pays an interest rate of 8% annually. Its annual sales are $800,000, its average tax rate is 25%, and its net profit margin on sales is 10%. If the company does not maintain a times interest earned (TIE) ratio of at least 5 to 1, then its bank will refuse to renew the loan and bankruptcy will result. Holding sales constant, at what operating (EBIT) margin would the bank refuse...

  • 4-5: Profitability Ratios BEP, ROE, and ROIC Duval Manufacturing recently reported the following information ROA Interest...

    4-5: Profitability Ratios BEP, ROE, and ROIC Duval Manufacturing recently reported the following information ROA Interest expense Accounts payable $655,000 9% $196,500 $950,000 Duval's tax rate is 30%. Duval finances with only debt and common equity, so it has no preferred stock, 40% of its total invested capital is debt, while 60% of its total invested capital is common equity. Calculate its basic earning power (BEP), its return on equity (ROE), and its return on invested capital (ROIC) Round your...

  • Firms HL and LL are identical except for their leverage ratios and the interest rates they...

    Firms HL and LL are identical except for their leverage ratios and the interest rates they pay on debt. Each has $30 million in invested capital, has $4.5 million of EBIT, and is in the 40% federal-plus-state tax bracket. Firm HL, however, has a debt-to-capital ratio of 60% and pays 12% interest on its debt, whereas LL has a 40% debt-to-capital ratio and pays only 9% interest on its debt. Neither firm uses preferred stock in its capital structure. Calculate...

  • Firms HL and LL are identical except for their financial leverage ratios and the interest rates...

    Firms HL and LL are identical except for their financial leverage ratios and the interest rates they pay on debt. Each has $20 million in invested capital, has $3 million of EBIT, and is in the 40% federal-plus-state tax bracket. Firm HL, however, has a debt-to-capital ratio of 55% and pays 13% interest on its debt, whereas LL has a 20% debt-to-capital ratio and pays only 8% interest on its debt. Neither firm uses preferred stock in its capital structure....

  • Firms HL and LL are identical except for their financial leverage ratios and the interest rates...

    Firms HL and LL are identical except for their financial leverage ratios and the interest rates they pay on debt. Each has $20 million in invested capital, has $4 million of EBIT, and is in the 40% federal-plus-state tax bracket. Firm HL, however, has a debt-to-capital ratio of 60% and pays 12% interest on its debt, whereas LL has a 25% debt-to-capital ratio and pays only 9% interest on its debt. Neither firm uses preferred stock in its capital structure....

  • Firms HL and LL are identical except for their financial leverage ratios and the interest rates...

    Firms HL and LL are identical except for their financial leverage ratios and the interest rates they pay on debt. Each has $23 million in invested capital, has $5.75 million of EBIT, and is in the 40% federal-plus-state tax bracket. Firm HL, however, has a debt-to-capital ratio of 60% and pays 12% interest on its debt, whereas LL has a 25% debt-to-capital ratio and pays only 8% interest on its debt. Neither firm uses preferred stock in its capital structure....

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT