Question
Problem 4-18 Leverage Ratios (LO3) Lever Age pays an 8% rate of interest on $10 million of outstanding debt with face value $10 million. The
Problem 4-18 Leverage Ratios (LO3)
| Lever Age pays an 8% rate of interest on $10 million of outstanding debt with face value $10 million. The firms EBIT was $1 million. |
| a. | What is times interest earned? (Round your answer to 2 decimal places.) |
| Times interest earned |
|
| b. | If depreciation is $200,000, what is cash coverage? (Round your answer to 2 decimal place.) |
| Cash coverage |
|
| c. | If the firm must retire $300,000 of debt for the sinking fund each year, what is its fixed-payment cash-coverage ratio (the ratio of cash flow to interest plus other fixed debt payments)? (Round your answer to 2 decimal places.) |
| Fixed-payment cash-coverage ratio |
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started