As the Financial vice president for Bear Enterprises, you have the following inf

Question

As the Financial vice president for Bear Enterprises, you have the following information: Expected net income after tax next year before new financing : $60,000,000 Sinking Fund payments due next year on existing debt: $20,000,000 Interest due next year on existing debt $18,000,000 Conpany Tax rate 25% Common Stock Price, per share $17 Common Shares outstanding: 22,000,000 Calculate Bear's times-interest earned ratio for next year assuming the firm raises $60 Million of new debt at an interest rate of 9 percent. Answer a. $3.29 b. $3.59 c. $2.25 d. $4.19

Explanation / Answer

as new financing interest to be paid = 60 million*9% = 5.4 million interset after tax = 5.4*(1-0.25) =$4.05 million EBIT / interest = 60million-20 million/(4.05+7.09) = $3.59

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.