As the financial vice president for Squamish Equipment, you have the following information:
Expected net income after tax next year before new financing	$ 40	million
Sinking-fund payments due next year on exisiting debt	$ 14	million
Interest due next year on existing debt	$ 15	million
Company tax rate	36%
Common stock price, per share	$ 20
Common shares outstanding	18	million
1. For next year, calculate Squamish's times burden covered ratio if Squamish sells 2 million new shares at $20 a share.
A. 1.03
B. 1.38
C. 1.60
D. 1.89
E. 2.10
F. None of the above.
2. Calculate Squamish's times interest earned ratio for next year assuming the firm raises $40 million of new debt at an interest rate of 7 percent.
A. 2.00
B. 3.09
C. 3.66
D. 4.35
E. None of the above.