16. Problem 15 in Chapter 3 asks you to construct a five-year financial projection for Aquatic Supplies beginning in 2022. Based on your forecast or the suggested answer available through McGraw-Hill's Connect, answer the following questions. a. Calculate the company's times-interest-earned ratio for each year from 2021 to 2026. b. Calculate the percentage EBIT can fall before interest coverage dips below 1.0 for each year from 2021 to 2026 . c. Consulting Table 6.5 in the text, what bond rating would Aquatic Supplies have in 2021 if the rating was based solely on the firm's interest coverage ratio? d. Based on this rating, would a significant increase in financial leverage be a prudent strategy for Aquatic Supplies? \begin{tabular}{|c|c|c|c|c|c|c|} \hline \multicolumn{7}{|c|}{ AQUATIC SUPPLIES CO. } \\ \hline \multicolumn{7}{|c|}{ INCOME STATEMENT (\$ millions) } \\ \hline & Actual & \multicolumn{5}{|c|}{ Forecast } \\ \hline & 2021 & 2022 & 2023 & 2024 & 2025 & 2026 \\ \hline Sales & 582.762 & 652.693 & 731.017 & 818.739 & 916.987 & 1,027.026 \\ \hline Cost of Goods Sold & 240.828 & 254.550 & 285.096 & 319.308 & 357.625 & 400.540 \\ \hline Gross Profit & 341.934 & 398.143 & 445.920 & 499.431 & 559.362 & 626.486 \\ \hline Selling, General, \& Administrative Exp. & 257.507 & 319.820 & 358.198 & 401.182 & 449.324 & 503.243 \\ \hline Operating Income Before Deprec. & 84.427 & 78.323 & 87.722 & 98.249 & 110.038 & 123.243 \\ \hline Depreciation \& Amortization & 25.221 & 29.371 & 32.896 & 36.843 & 41.264 & 46.216 \\ \hline Operating Profit & 59.206 & 48.952 & 54.826 & 61.405 & 68.774 & 77.027 \\ \hline Interest Expense & 16.430 & 18.636 & 18.801 & 18.841 & 18.733 & 18.446 \\ \hline Pretax Income & 42.776 & 30.316 & 36.025 & 42.564 & 50.041 & 58.581 \\ \hline Total Income Taxes & 14.971 & 10.611 & 12.609 & 14.897 & 17.514 & 20.503 \\ \hline Net Income & 27.805 & 19.705 & 23.416 & 27.667 & 32.527 & 38.078 \\ \hline \multicolumn{6}{|c|}{ BALANCE SHEET (\$ millions) } & \\ \hline & Actual & \multicolumn{5}{|c|}{ Forecast } \\ \hline & 2021 & 2022 & 2023 & 2024 & 2025 & 2026 \\ \hline \multicolumn{7}{|l|}{ ASSETS } \\ \hline Cash \& Equivalents & 7.152 & 13.054 & 14.620 & 16.375 & 18.340 & 20.541 \\ \hline Account Receivable & 70.538 & 84.850 & 95.032 & 106.436 & 119.208 & 133.513 \\ \hline Inventories & 39.033 & 32.635 & 36.551 & 40.937 & 45.849 & 51.351 \\ \hline Prepaid Expenses & 9.339 & 9.339 & 9.339 & 9.339 & 9.339 & 9.339 \\ \hline Other Current Assets & 27.076 & 39.162 & 43.861 & 49.124 & 55.019 & 61.622 \\ \hline Total Current Assets & 153.138 & 179.039 & 199.403 & 222.211 & 247.756 & 276.366 \\ \hline Net Property, Plant, \& Equipment & 81.648 & 97.904 & 109.652 & 122.811 & 137.548 & 154.054 \\ \hline Intangible Assets & 9.415 & 9.415 & 9.415 & 9.415 & 9.415 & 9.415 \\ \hline Other Assets & 24.642 & 32.635 & 36.551 & 40.937 & 45.849 & 51.351 \\ \hline TOTAL ASSETS & 268.843 & 318.993 & 355.022 & 395.374 & 440.568 & 491.186 \\ \hline \multicolumn{7}{|l|}{ LIABILITIES } \\ \hline Accounts Payable & 36.951 & 39.162 & 43.861 & 49.124 & 55.019 & 61.622 \\ \hline Accrued Expenses & 31.206 & 32.635 & 36.551 & 40.937 & 45.849 & 51.351 \\ \hline Other Current Liabilities & 3.663 & 3.663 & 3.663 & 3.663 & 3.663 & 3.663 \\ \hline Total Current Liabilities & 71.820 & 75.459 & 84.075 & 93.724 & 104.532 & 116.636 \\ \hline Long Term Debt & 157.720 & 186.363 & 188.010 & 188.414 & 187.327 & 184.462 \\ \hline Accrued Wages & 21.418 & 19.581 & 21.930 & 24.562 & 27.510 & 30.811 \\ \hline Total Liabilities & 250.958 & 281.403 & 294.015 & 306.701 & 319.368 & 331.908 \\ \hline \multicolumn{7}{|l|}{ EQUITY } \\ \hline Common Stock & 1.702 & 1.702 & 1.702 & 1.702 & 1.702 & 1.702 \\ \hline Capital Surplus & 55.513 & 55.513 & 55.513 & 55.513 & 55.513 & 55.513 \\ \hline Retained Earnings & 118.729 & 138.434 & 161.851 & 189.517 & 222.044 & 260.122 \\ \hline Less: Treasury Stock & 158.059 & 158.059 & 158.059 & 158.059 & 158.059 & 158.059 \\ \hline Total Equity & 17.885 & 37.590 & 61.007 & 88.673 & 121.200 & 159.278 \\ \hline TOTAL LIABILITIES \& EQUITY & 268.843 & 318.993 & 355.022 & 395.374 & 440.568 & 491.186 \\ \hline \end{tabular}