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. The Compaq Corporation has $500,000 of debt outstanding, and it pays an annual interest rate of 10%. Compaqs annual sales are $2 million, average
. The Compaq Corporation has $500,000 of debt outstanding, and it pays an annual interest rate of 10%. Compaqs annual sales are $2 million, average tax rate is 30%, and its net profit after-tax is $1,00,000. If the company does not maintain a minimum operating income level of $250,000, its bank will refuse to renew the loan and bankruptcy will result. Calculate Compaq Corporations current operating income and comment on its eligibility of this loan renewal.
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