Universal Inc. is considering to two financing alternatives to acquire a new firm to combine with its existing operations. Given the select financial information below, calculate the firm's coverage ratios and discuss which credit rating the firm would qualify for under each alternative The acquisition price (Smillion) Universal's expected EBIT in 2022 after the acquisition $1,800 $1,000 80 No. shares outstanding (millions) Dividends per share. $1.50 + Alt. 1: Equity financing (Smillion) Universal's stock price No. of new shares to be issued (millions) $1,800 $100 18.0 Alt. 2: Debt financing (Smillion) Interest rate on new debt New principal repayment (Smillion) $1,800 10.00% $100 Tax rate 30% Universal Inc. is considering to two financing alternatives to acquire a new firm to combine with its existing operations. Given the select financial information below, calculate the firm's coverage ratios and discuss which credit rating the firm would qualify for under each alternative Before new financing Alt. 2: Debt financing 3 Interest-bearing debt outstanding Interest expense Principal payments Shareholders' equity (book value) Common shares outstanding Dividends paid at $1.50 per share 2022 Projected Alt. 1: Equity financing $1,525 $85 $50 $1,255 80 $120 3 3 7 8 Alt. 2: Debt financing Alt. 1: Equity financing After tax Before tax After tax Before tax Interest expense $0 SO SO $0 $o SO Principal payment Common dividends Alt. 1: Equity financing Percentage EBIT Coverage can fall #DIV/0! #DIV/0! #DIV/01 Alt. 2: Debt financing Percentage EBIT can Coverage fall #DIV/0! #DIV/0! #DIV/0! Times interest earned Times burden covered Times common covered What rating would you expect Universal to have under each of the financing methods? Does the firm risk losing its investment-grade rating under one of the financing alternatives