As the financial vice president of Progressive Media, you have the following information:
| Next year’s expected net income after tax but before new financing | $50 million |
| Sinking-fund payments due next year on existing debt | $17 million |
| Interest due next year on existing debt | $18 million |
| Company tax rate | 35% |
| Common stock price, per share | $25 |
| Common shares outstanding | 20 million |
a. Calculate Progressive’s times-interest-earned ratio for next year assuming the firm raises $50 million of new debt at an interest rate of 7 percent.
b. Calculate Progressive’s times-burden-covered ratio for next year assuming annual sinking-fund payments on the new debt will equal $8 million.
c. Calculate next year’s earnings per share assuming Progressive raises the $50 million of new debt.
d. Calculate next year’s times-interest-earned ratio, times-burdencovered ratio, and earnings per share if Progressive sells 2 million new shares at $20 a share instead of raising new debt.
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