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As the chief financial officer of Adirondack Designs, you have the following information: Next year's expected net income after tax but before new financing
As the chief financial officer of Adirondack Designs, you have the following information: Next year's expected net income after tax but before new financing Sinking-fund payments due next year on the existing debt Interest due next year on the existing debt Common stock price, per share Common shares outstanding Company tax rate $51 million $26 million $ 21 million $ 33.5 31 million 35% a. Calculate Adirondack's times interest-earned ratio for next year assuming the firm ralses $61 million of new debt at an interest rate of 2 percent b. Calculate Adirondack's times burden-covered ratio for next year assuming annual sinking-fund payments on the new debt will equal $3.0 million c. Calculate next year's earnings per share assuming Adirondack raises the $61 million of new debt. d. Calculate next year's times-interest-earned ratio, times-burden-covered ratio, and earnings per share if Adirondack sells 2.6 million new shares at $22 a share instead of raising new debt.
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a To calculate Adirondacks times interest earned ratio for next year we need to divide the earnings before interest and taxes EBIT by the interest exp...Get Instant Access to Expert-Tailored Solutions
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