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QUESTION 4 The All Delivery Company needs to lease additional trucks for its delivery business. The company approached the bank for a loan. The bank
QUESTION 4
| The All Delivery Company needs to lease additional trucks for its delivery business. | ||||||||
| The company approached the bank for a loan. The bank manager requested and was | ||||||||
| given the following information: | ||||||||
| 1. The company pays monthly lease payments of $13,000 for its fleet of trucks | ||||||||
| 2. The company pays annual interest expense of $55,000 on its loans | ||||||||
| 3. The company pays annual lease principal payment of $125,000 | ||||||||
| 4. The company spends $19,000 annually to replace some of its equipments | ||||||||
| 5. The company pays $45,000 in taxes for the current year | ||||||||
| 6. The company generates EBITDA of $700,450 | ||||||||
A. Please calculate the Fixed-Charge Coverage (15%)
B. Should the loan officer approve the loan request? Why? (5%)
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