Question 6

Driver Enterprises just reported earnings before interest and taxes (EBIT) of $506 million and interest expense of $56 million. Included among its operating expenses were lease rental expenses of $122 million. On its balance sheet it also reported $274 million as the present value of its lease obligations. Calculate the fixed charge coverage ratio to incorporate the presence of the lease obligations. Assume the appropriate discount rate for valuing leases is 7%. Present your answer rounded to two decimal places, e.g., 7.65.