Mike Smith, CFA, an analyst with Blue River Investments, is considering buying a Montrose Cable Company corporate hond. He has collected the halance sheet and income statement information for Montrose as shown in Table 1 below. He has also calculated the three ratios shown in Table 2 below, which indicate that the bond is currently rated "A" according to the firm's internal bond-rating criteria. Table 3 Montrose Off-Balance-Sheet Items - Montrose has guaranteed the long-term debt (principal only) of an unconsolidated affiliate. This obligation has a present value of $980,000. - Montrose has sold $510,000 of accounts receivable with recourse at a yield of 8 percent. - Montrose is a lessee in a new noncancelable operating leasing agreement to finance transmission equipment. The discounted present value of the lease payments is $6,130,000 using an interest rate of 10 percent. The annual payment will be $1,000,000. Specifically, Smith wishes to evaluate the impact of each of the off-balance-sheet items on each of the ratios found in Table 2. Assume that the "loan proceeds" from the financed receivables would be invested at interest rate of 8 percent. a. Calculate the combined effect of the three off-balance-sheet items in Table 3 on each of the following three financial ratios shown in Table 2. Do not round intermediate calculations. Round your answers to four decimal places. 1. EBITDA/interest expense: 2. Long-term debt/equity: 3. Current assets/current liabilities: b. Evaluate whether or not the credit yield premium incorporates the effect of the off-balance-sheet items, state and justify whether or not the current credit yield premium compensates Smith for the credit risk of the bond, based on the internal bond-rating criteria found in the firm's internal bond-rating criteria. Round your answers to the nearest whole number. The current rating of the Montrose bond as an "A" the effect of the off-balance-sheet items, and the current credit yield premium of 60 basis points sufficient to compensate Smith for the credit risk of the bond