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What effect will the loan and the investment have

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Reference no: EM133528275

Question: The Karson Transport Company currently has net operating income of $509,000 and pays interest expense of $210,000.

The company plans to borrow $1.07 million on which the firm will pay 11 percent interest. The borrowed money will be used to finance an investment that is expected to increase the? firm's net operating income by $393,000 a year.

a. What is? Karson's times interest earned ratio before the loan is taken out and the investment is? made?

b. What effect will the loan and the investment have on the? firm's times interest earned? ratio?

 

Reference no: EM133528275

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