13. Use the following information to calculate the three interest coverage ratio

Question

13. Use the following information to calculate the three interest coverage ratios indicated (to one decimal place) EDIT i S1000 Depreciation is $300 Rent Expense is $75 Interest Expense is $3s0 EBIT interest Coverage Ratio EBITDA Interest coverage Ratio i - EBITDAR Coverage Ratio 14, ar NOPLAT ;200, g =4%, RONIC = 10%, WACC+ 8%, then continuing value in year t is closest to: a) $667 b) $1,333 c) $3,000 d) 55,000 15. A firm has 4,000,000 shares of stock outstanding with a price per share equal to $22. There are 200,000 bonds outstanding ea priced at $995 each. The cost of equity is 14 percent, the cost of debt is 8 percent, and the corporate tax rate is 34 percent. What the WACC? a) 10.3 percent b) 9.8 percent. c) 8.0 percent. d) 8.8 percent. Answer 16. Researchers have concluded that an appropriate range of the equity market risk premium for use in calculation of the WA valuation models should be 10 to 12 percent. True or False? Answer 17. Some people recommended an adjustment to a firm's beta based on the formula .33+.67* beta. This will: a) Lower beta in all cases b) Increase beta in all cases ) Move the beta toward 1. swer

Explanation / Answer

Question no:13 EBIT =$1000 Depreciation Expense =$300 Rent expense =$75 Interest expenses =$350 EBIT interest coverage ratio = EBIT / Interest expenses EBIT interest coverage ratio = $1000/$350 =2.857 times EBITDA interest coverage ratio = EBITDA / Interest expenses EBITDA interest coverage ratio = ($1000+$300)/$350 =3.714 times EBITDAR coverage ratio = EBITDAR / Interest expenses EBITDAR interest coverage ratio = ($1000+$300+$75)/$350 =3.929 times

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