XYZ Corporation has total capital of $8,000,000 and forecasts next year's EBIT to be $600,000. The firm
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Question:
XYZ Corporation has total capital of $8,000,000 and forecasts next year's EBIT to be $600,000. The firm can borrow at 10% and wants to maintain a minimum TIE ratio of 3. Using the operating income method, what is maximum debt-to-capital ratio XYZ Corporation can carry and still meet its TIE ratio of 3 times?
Please write out the answer in a step by step format. do not do in excel!
A. 25 percent
B. 40 percent
C. 50 percent
D. 75 percent
E. 30 percent
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