Given Asset =9,000,000,000
Tax Rate = 40%
BEP =8%
ROA =3%
Now, BEP = EBIT/Total Assets
or, 8% = EBIT/9,000,000,000
or, EBIT = 720,000,000 ----->(1)
Net Income = ROA * asset
Net income = 3% * 9,000,000,000
Net income =270,000,000
EBIT - Interest = EBT ----->(2)
or, EBT - EBT *(tax rate) = Net Income ----->(3)
or, EBT(1-tax rate) =Net Income
from 3
EBT(1-tax rate) = 270,000,000
EBT(0.6) = 270,000,000
EBT = 450,000,000 ------>(4)
from 1,2 and 4
EBIT - Interest = EBT
or, 720,000,000 - Interest = 450,000,000
Interest Expense = 270,000,000 ---->(5)
TIE = EBIT/ interest expense
or, TIE = 720,000,000/270,000,000
or TIE = 2.666666
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