Daly Company has the following information for 2008. Cost of goods sold $88 mill

Question

Daly Company has the following information for 2008.

Cost of goods sold

$88 million

Dividend per share

$0.20

Earnings before interest and taxes

$13 million

Income tax rate

35%

Interest expense (at average interest rate 10%)

$1 million

Inventory turnover ratio

5

No of shares

5 million

Price per share

$13

Weighted average cost of capital

12%

Find its Earnings per share and Interest coverage ratio

Cost of goods sold

$88 million

Dividend per share

$0.20

Earnings before interest and taxes

$13 million

Income tax rate

35%

Interest expense (at average interest rate 10%)

$1 million

Inventory turnover ratio

5

No of shares

5 million

Price per share

$13

Weighted average cost of capital

12%

Explanation / Answer

Earning Before Interest and Taxes=13 Interest Expenses=1 Earning after interest and tax=(13-1)*(1-0.35)=7.8 Earning per share=7.8/5=1.56 Interest Coverage Ratio=Earning before Interest and Tax/Interest=13/1=13

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