Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please help solve the following. Please see details below: Revenues 2 3 4 LOGS 500 515 536 Gross Profit 300 306 314 SG &A 200

image text in transcribedimage text in transcribed

Please help solve the following.

Please see details below:

image text in transcribedimage text in transcribed
Revenues 2 3 4 LOGS 500 515 536 Gross Profit 300 306 314 SG &A 200 209 222 100 102 104 Operating Income 100 107 118 Depreciation 30 30 30 EBITDA 130 137 148 Debt 300 300 Notes : ( 1 ) revenue growth in years 2 and 3 is all volume driven ( 2 ) COGS in year 1 is 67% variable 1 . In the above example ( which is the same historical information as the previous problem ) assume the biggest risk to this company is customer concentration . Assume one customer accounts for 25% of sales . Assume the company loses this customer . Project revenue , COGS and EBITDA in year 4 . Calculate Debt / EBITDA and interest coverage in year 4 . 2 . Now assume the largest risk to this customer is rising costs that cannot be passed along to the customers . Specifically , assume that the variable component of COGS rises in price by 30% in year 4 . Project revenue , COGS and EBITDA in year 4 . Calculate Debt / EBITDA and interest coverage in year 4 .Calculating 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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Income Tax Fundamentals 2013

Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill

31st Edition

1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516

More Books

Students also viewed these Finance questions

Question

10. What is meant by a feed rate?

Answered: 1 week ago