Question

1 - Chapter 6 0 Saved Help Save & Exit Required information [The following information applies to the questions displayed below.) of 4 Squamish Equipment Selected financial information Expected net income after tax next year before new financing Sinking-fund payments due next year on existing debt Interest due next year on existing debt Company tax rate Common stock price, per share Common shares outstanding $ $ $ 40 million 14 million 15 million 36% 20.00 18 million Please refer to the financial information for Squamish Equipment above. Calculate Squamish's times-interest-earned ratio for next year assuming the firm raises $40 million of new debt at an interest rate of 7 percent. Multiple Choice

Answer 1

1. Times interest earned ratio= 4.35

Times Interest Earned fatio = EBIT Totallinterest Expenses EBIT = NI (1-4) & Interest Expenses (Before) = 40 (1-0.36) + an + 15 = 77.5 Total Interest Expenses + Interest Expenses before new financing 1.E after new financing 215 + 40x7). 17.8 Times interest Earned Ratio = 77.5 ---4-3539 . 178 - 4-35