Boehm-Gau Real Estate Speculators, Inc., and the Northern California Electric Utility Company have the following EBIT and debt-servicing burden:

The tax rate for Boehm-Gau is 40 percent, and for Northern California Electric Utility is 36 percent. Compute the interest coverage and the debt-service coverage ratios for the two companies. With which company would you feel more comfortable if you were a lender? Why?

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NORTHERN BOEHM-GAUCALIFORNIA $100,000,000 45,000,000 35,000,000 Expected EBIT Annual interest $5,000,000 1,600,000 2,000,000 Annual principal payments on debt