In 2020, Natural Selection, a nationwide computer dating service, had $500 million of assets and $200 million

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In 2020, Natural Selection, a nationwide computer dating service, had

$500 million of assets and $200 million of liabilities. Earnings before interest and taxes were $120 million, interest expense was $28 million, the tax rate was 40 percent, principal repayment requirements were $24 million, and annual dividends were 30 cents per share on 20 million shares outstanding.

a. Calculate the following for Natural Selection:

i. Liabilities-to-equity ratio ii. Times-interest-earned ratio iii. Times burden covered

b. What percentage decline in earnings before interest and taxes could Natural Selection have sustained before failing to cover:

i. Interest payment requirements ii. Principal and interest requirements iii. Principal, interest, and common dividend payments

 LO.1

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Related Book For  book-img-for-question

Analysis For Financial Management

ISBN: 9781260772364

13th Edition

Authors: Robert Higgins, Jennifer Koski, Todd Mitton

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