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Tyco has $60 million in total investor-supplied operating capital. The company’s WACC(% cost of capital) is...

Tyco has $60 million in total investor-supplied operating capital. The company’s WACC(% cost of capital) is 8.0 % and is subject to 30% corporate income tax rate. The company has the following items from the income statement: Interest expense 1.0 million Net income $ 3.0 million What is Tyco’s Times Interest Earned Ratio

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Answer #1
Mlns.
Operating Income/EBIT x
Less: Interest 1
EBT x-1
Tax at 30% (x-1)*30%
Net Income 3
so, (x-1)*(1-30%)=3
so, solving the above,Opg. Income/EBIT, x= $ 5.285714 mlns.
Times Interest Earned Ratio= Opg. Income or EBIT/Interest expense
ie. 5.285714/1=
5.285714
5.29
times
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