Computation of the borrowable amount through debentures

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Reference no: EM1312391

Delaware Steel Company has $100 million of 13 percent debentures outstanding. The indenture (loan covenants) limits additional borrowing such that the total interest coverage (EBIT/interest) is at least three times. Delaware\'s EBIT last year was $52 million. How much could Delaware borrow under a term loan at 13 percent interest without breaching the indenture restriction?

Reference no: EM1312391

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