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%)