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The Tarpon Corp has $350,000 of debt outstanding, and it pays an interest rate of 9% annually. Its annual sales are $900,000, its average tax
The Tarpon Corp has $350,000 of debt outstanding, and it pays an interest rate of 9% annually. Its annual sales are $900,000, its average tax rate is 25%, and its net profit margin on sales is 10%. If the company does not maintain a times interest earned (TIE) ratio of greater than 5 to 1, then its bank will refuse to renew the loan and bankruptcy will result. Holding sales constant, at what operating (EBIT) margin would the bank refuse to renew the loan? 17.50% 15.17% 13.13% 14.25%
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