Problem $6-7$

As the chief financial officer of Adirondack Designs, you have the following information:Sinking$-$fund payments due next year on the existing debt $ $11$ million

Interest due next year on the existing debt $ $6$ million

Common stock price, per share $ $26\mathrm{.}0$

Common shares outstanding $16$ million

Company tax rate $40\%$a$.$ Calculate Adirondack's times$-$interest$-$earned ratio for next year assuming the firm raises $$46$ million of new debt at an interest rate

of $3$ percent.

b$.$ Calculate Adirondack's times$-$burden$-$covered ratio for next year assuming annual sinking$-$fund payments on the new debt will equal

$$2\mathrm{.}5$ million.

c$.$ Calculate next year's earnings per share assuming Adirondack raises the $$46$ million of new debt.

d$.$ Calculate next year's times$-$interest$-$earned ratio, times$-$burden$-$covered ratio, and earnings per share if Adirondack sells $1\mathrm{.}1$ million

new shares at $$21$ a share instead of raising new debt.

Note: Do not round intermediate calculations. Round "Earnings per share" answers to $2$ decimal places and other answers to $1$

decimal place.