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GAME LODGE had the following Financial Information & Income Statement for 2019: Sales Revenue $ 1,387,000 Operating expenses (other than depreciation) 762.850 EBITDA $ 624,150

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GAME LODGE had the following Financial Information & Income Statement for 2019: Sales Revenue $ 1,387,000 Operating expenses (other than depreciation) 762.850 EBITDA $ 624,150 Depreciation expense 300,000 EBIT $ 324,150 Interest 199,150 EBT $ 125,000 Taxes (20%) 25.000 Net Income $ 100,000 $ Cash and equivalents $ 120,000 Fixed Assets $ 450,000 Current Liabilities $ 125,000 Current Ratio 3 X DSO 41 days ROE 15.4% Game Lodge has no preferred stock - only common equity, current liabilities, and long-term debt. The CEO has expressed some interest in bonds and wants to get an estimate on the interest rate. Assume: expected rate of inflation is expected to be 3% next year, fall to 2% for the following year, and decrease to 1% for each of the following years r* is to remain constant at 2% maturity risk premium is o for next year, and will increase by. 10 for each following year, up to a limit of 1.0% . 3) Calculate the rate of interest (r) on the following term bonds: a) 1-year bond b) 5-year bond c) 10-year bond

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