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Calculate the fixed-charged coverage

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Reference no: EM133004588

The management of National Utility Company has applied for a $550,000 commercial loan to purchase additional leased vehicles for its expanding business. The commercial loan office has requested and received the following itemized financial information to perform the due diligence:

  1. The company generates Earnings Before Interest, Taxes, Depreciation & Amortization of $750,700
  2. The company pays $85,000 in taxes for the current year
  3. The company pays annual interest expense of $95,000 on its loans
  4. The company spends $10,000 annually to replace some of its Property, Plants, and Equipments
  5. The company pays annual lease principal payments of $110,000
  6. The company pays monthly lease payments of $3,000 for its fleet of vehicle

Problem a. Calculate the Fixed-Charged Coverage

Problem b. Should the loan officer approve the loan request?

Reference no: EM133004588

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