Suppose a firm has EBIT of $4.95 million, interest expenses of $2.4 million, depreciation expenses of...

Question

Question

Suppose a firm has EBIT of $4.95 million, interest expenses of $2.4 million, depreciation expenses of...

Suppose a firm has EBIT of $4.95 million, interest expenses of $2.4 million, depreciation expenses of $1.3 million, and has a tax rate of 35%. Its bank agrees to lend up to 4.2 times its EBITDA. How much debt can the firm borrow from the bank?

The maximum amount they can borrow is $? million

business finance

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Answer 1

Answer #1

EBITDA=EBIT+depreciation

=4.95+1.3

=6.25 million

The maximum amount they can borrow is

=4.2*EBITDA

=4.2*6.25

=26.25 million

the above is answer..

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Answer 2

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