Question
Nile Holdings Financial Information as of 31 DEC 16 Last Years EBIT $300,000,000 expected EBIT $333,000,000 Current Portion of existing LT debt $46,250,000 Interest Due
Nile Holdings
Financial Information as of 31 DEC 16
| Last Years EBIT | $300,000,000 |
| expected EBIT | $333,000,000 |
| Current Portion of existing LT debt | $46,250,000 |
| Interest Due (2017) on Exisiting Debt | $75,000,000 |
| Tax Rate | 40% |
| Times Interest Earned | 4 |
| Common Stock Price per share | $50 |
| Commonshares Outstanding | 25,000,000.00 |
| Dividends per share | $2.50 |
A) Assume Nile raises $100 million of new debt at the end of 2016, at an interest rate of 8.25%.
a. Calculate the firm's pro forma 2017 times-interest-earned (TIE) ratio.
b. Calculate 2017's times-burden-covered ratio.
c. What percentage can EBIT fall before they can no longer meet there annual burden?
d. Calculate 2017s earnings per share.
B) Now assume Nile sells 2 million new shares at $50 a share instead of raising new debt.
a. Calculate the firm's pro forma 2017 times-interest-earned (TIE) ratio.
b. Calculate 2017's times-burden-covered ratio
c. What percentage can EBIT fall before they can no longer meet there annual burden?
d. Calculate 2017s earnings per share
C. Comparing parts A and B, would you recommend they issue Debt or Equity?
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Audit Risk Management Driving Audit Value The Best Practice Strategy Guide For Minimising The Audit Risks And Achieving The Internal Audit Strategies And Objectives Volume 2
Authors: Hans Beumer
1st Edition
3906861155, 978-3906861159
