Question
Need help with this one. I got two different answers. The Morris Corporation has $900,000 of debt outstanding, and it pays an interest rate of
Need help with this one. I got two different answers.
The Morris Corporation has $900,000 of debt outstanding, and it pays an interest rate of 9% annually. Morris's annual sales are $4.5 million, its average tax rate is 40%, and its net profit margin on sales is 3%. If the company does not maintain a TIE ratio of at least 5 to 1, its bank will refuse to renew the loan and bankruptcy will result. What is Morris's TIE ratio? Do not round intermediate calculations. Round your answer to two decimal places.
My first answer was 2.78
Second answer was 3.78 I believe this is the correct one though
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