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Fixed payment coverage ratio

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Reference no: EM131502982

What is the "Fixed Payment Coverage Ratio? I have included the data below.

Earnings before interest and taxes = $3,085,000

Lease Payment = $188,000

Interest Expense=1,035,000

Principal Payments = $781,000

Preferred Stock Dividends = $88,200

Formula I was given to use:

Earnings before interest and taxes + Lease Payments

                   Interest + Lease Payments +

+(Principal payments + Preferred Stock dividends) x [1/(1-7))

Tax rate is 40%, I am not sure what to indicate for this [1/(1-7])

Or where the  [1/(1-7]); primarily the 7 opposed to a 4.

Reference no: EM131502982

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