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Calculate acne utilities company fixed-charge coverage

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Reference no: EM133000677

You are a graduate of York College, CUNY, and has been hired as a Bank Loan Manager, in the commercial lending division of a bank. You are responsible for approving loans to commercial businesses.

The management of Acne Utilities Company, a private utility company in Queens, NY, has applied for a $350,000 long-term loan. You have requested the following information from the company to perform the due diligence and have noticed:

  • The company pays monthly lease payments of $8,500 for its fleet of vehicles
  • The company pays annual interest expense of $65,000 on its loans
  • The company pays annual lease principal payments of $85,000
  • The company spends $4,500 annually to replace some of its computer equipment
  • The company pays $105,000 in taxes for the current year
  • The company generates Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $390,000

Problem 1: Calculate Acne Utilities Company's Fixed-Charge Coverage

Reference no: EM133000677

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