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Times-Interest-Earned Ratio The Morris Corporation has $250,000 of debt outstanding, and it pays an interest rate of 9% annually. Morris's annual sales are $1.25 million, its average tax rate is 40%, and its net profit margin on sales is 6%. If the company does not maintain a TIE ratio of at least 3 to 1, then its bank will refuse to renew the loan and bankruptcy will result. What is Morris's TIE ratio? Round intermediate calculations to two decimal places. Round your answer to two decimal places.
Gallagher Group has a debt/equity ratio of 1.2. The firm has a cost of equity of 12% and a cost of debt of 8%. What will the cost of equity be if the target debt/equity ratio increases to 2.0 and the cost of debt does not change? Ignore taxes and ban..
Capital Co. has a capital structure, based on current market values, that consists of 48 percent debt, 18 percent preferred stock, and 34 percent common stock. If the returns required by investors are 9 percent, 11 percent, and 14 percent for the deb..
What is the present value of a perpetuity that pays $1,000 per year, beginning one year from now, if the appropriate interest rate is 2%? (Round off to the nearest dollar and ignore the $ sign in your input.)
Suppose you forecast that the standard deviation of the market return will be 20% in the coming year. If the measure of risk aversion in Equation 5.17 is A = 4, what would be a reasonable guess for the expected market risk premium? What will happen t..
Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning with a dividend of $1.50 coming 3 years from toda..
If considering adding two pieces of equipment, a truck and an overhead pulley system, in this year's capital budget. The projects are independent. The cash outlay for the truck is $17,400, and that for the pulley system is $20,200. The firm's cost of..
Discuss primary financial statements published by a corporation, the various classifications used in a balance sheet-What is the purpose of a Balance Sheet? What information does it provide?
Seerex Wok Co. is expected to pay a dividend of $1.65 one year from today on its common shares. That dividend is expected to increase by 5.10 percent every year thereafter. If the price of Seerex common stock is $20.06, what is the cost of its common..
The Sandler family consists of two married adults, and two teenagers. Mr. and Mrs. Sandler will file their IRS return as a joint return. What is the total reportable gross income from all sources? After they put $5600 into qualified retirement plan a..
Why do you think that they have made this change? Do you think that this is an ethical behavior for the companies of today? Why or why not?
You place an order for 540 units of inventory at a unit price of $170. The supplier offers terms of 2/15, net 60. a-1 How long do you have to pay before the account is overdue? Days until overdue days a-2 If you take the full period, how much should ..
Which of the following are advantages of the corporate form of organization?
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