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Nile Holdings Selected Financial Information as of December 31, 2016 Last Years EBIT $300,000,000 expected EBIT $333,000,000 Current Portion of existing LT debt $46,250,000 Interest
Nile Holdings Selected Financial Information as of December 31, 2016
| 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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Financial Management Theory And Practice
Authors: Prasanna Chandra
10th Edition
9353166527, 978-9353166526
