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Base each of the following questions on the exhibit below . Each question is independent - -in other words , don't use any adjustments you made in question 1 to answer question 2 . Show the adjustment column similar to what we did in class. 1. Assume the company below issued $1, 000 of additional debt. Recalculate Debt / EBITDA and interest coverage. Revenues Adjustments Pro Forma COGS 5 , 000 4, 000 Gross Profit 1 , 000 SG & A 250 _demon Depreciation 75 Operating Income 675 EBITDA 750 Debt 1 , 500 Debt / EBITDA 2 X EBITDA / Interest 8.3X 2. Assume the company purchased a competitor which increased revenue by $1 , 500 with similar gross margins . Assume the company borrowed $2 , 000 to finance this acquisition . Assume $50 incremental SG &A expenses. Recalculate Debt / EBITDA and interest coverage . Adjustments Pro Forma Revenues 5 , 000 COGS 4 , 000 Gross Profit 1 , 000 SG&A 250 Depreciation 75 Operating Income 675 EBITDA 750 Debt 1 , 500Calculating Interest Coverage and Fixed When calculating interest expense : 1 . Use 6% multiplied by debt outstanding when : A. It is an Investment Grade company and / or B. Debt / EBITDA is less than 3x 2. Use 10 % multiplied by debt outstanding when : A . It is a High Yield company and / or B. Debt / EBITDA is greater than 3x