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(Coverage ratios) EndRun Corp., has $100 million of earnings before interest and taxes and $40 million of interest expense.
a. Calculate the firm’s interest coverage ratio.
1.85
2.00
2.1
2.16
2.25
2.34
2.40
2.45
2.50
b. Calculate the pro forma interest coverage ratio assuming the issuance of $100 mil- lion of 10% debt with the issue proceeds to be invested fully in a plant under con- struction.
c. Calculate the pro forma interest coverage ratio assuming the issuance of $100 million of 10% debt with the proceeds to be invested temporarily in commercial paper that yields 8%.
Mary and Carlos want to buy a $400,000 house. They have $50,000 for a down payment. Their lender is offering them a 30 year mortgage at 6.2%. What is their total mortgage payment (principal & interest + escrow)?
Fishing Charter Inc. estimates that it invests ?$0.34 in assets for each dollar of new sales. ? However, ?$0.03 in profits are produced by each dollar of additional? sales, of which ?$0.01 can be reinvested in the firm. If sales rise by ?$300,000 nex..
How to mix these two assets to create a portfolio with zero standard deviation?
Money Market Versus Call Option Hedging. You expect that inflation in the United States will be 3%, versus 5% in the United Kingdom. The expected spot rate in one year is $1.8756. The spot rate of the pound as of today is $1.8000.
Under the MM extension with growth, what is the value of your firm's tax shield, i.e., how much value does the use of debt add?
Assume that the combined value of the puts and stock exceeds the value of the actual call by less than the present value of the exercise price. Show how an arbitrage profit can be made.
Kaleb’s Karate Supply had a profit margin of 12 percent, sales of $23.8 million, and total assets of $8.8 million. What was the total asset turnover?
Agan Interior Design provides home and office decorating assistance to its customers. In normal operation, an average of 2.5 customers arrives each hour. Compute the operating characteristics of the customer waiting line, assuming Poissonarrivals and..
By what percentage do you expect the spot rate to change over the coming year?
The dividend payout ratio is also expected to remain at 30% over the next three years.
Jallouk Corporation has a bond outstanding with a face value of $40,000. What is the price of this bond?
You are promoting a rock concert in your area. Your purpose is to earn a profit, so you need to establish the formal structure of a business entity. Assume you organize as a corporation.
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