Question
A. Discuss the difference between one year default rates and cumulative default rates. B . Consider the following investment grade company:(Please answer second Part) EBITDA500
A. Discuss the difference between one year default rates and cumulative default rates.
B. Consider the following investment grade company:(Please answer second Part)
EBITDA500
Debt1,000
Rent50
1.Calculate EBITDA/interest, fixed charge coverage and Debt/EBITDA
Debt / EBITDA = 1000/500 = 2x
EBITDA /Interest expense= $ 500 / (1000*6%) = 500/60 = 8.3x
Fixed charge coverage = (EBITDA + Rents) / (Interest Expense + Rents) = (500 + 50)/ (60+50) = 5x
2.Discuss why fixed charge coverage is a better ratio than EBITDA/interest when calculating a firm's ability to service its obligations?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started