Calculate the times burden covered ratio

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Reference no: EM13813498

Next year's expected net income after tax, but before new financing -------- $80 Million

Sinking-fund payments due next year on existing debt ---------------------------$23 Million

Interest due next year on existing debt------------------------------------------------$14 Million

Company Tax Rate--------------------------------------------------------------------------35%

Common Stock Price-----------------------------------------------------------------------$32

Common Shares outstanding------------------------------------------------------------30 Million

1. Calculate the times interest earned ratio for next year assuming the firm raises $40 million of new debt at an interest rate of %6

2. Calculate the times burden covered ratio for next year assuming annual sinking fund payments on the new debt will equal $10 million.

Reference no: EM13813498

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