What is firm pro forma times interest earned ratio

Assignment Help Financial Management

Reference no: EM131062914

As CFO of Nile Holdings, a carpet wholesaler, you have the following information as of December 2011:

Last year's EBIT, 2011: $175.0 million

Expected EBIT, 20-12: $189.8 million

Current portion of existing long-term debt, due 2012: $34 million

Interest due 2012 on existing debt: $36 million

Tax rate: 35%

Common stock price today, per share: $50

Common shares outstanding: 20 million

Dividends per share: $2

Nile has an attractive investment opportunity, and to finance it, must decide whether to issue $100 million in new debt or new equity. Assume Nile raises $100 million of new debt at the end of 2011, at an interest rate of 7%. What is the firm's pro forma 2012 times interest earned (TIE) ratio?

Please provide calculation details

Reference no: EM131062914

Questions Cloud

With the first cash flow received three years : What is the present value of an annuity of $6,100 per year, with the first cash flow received three years from today and the last one received 25 years from today? Use a discount rate of 6 percent.

What is the six-month forward exchange rate : Six-month T-bills have a nominal rate of 4%, while default-free Japanese bonds that mature in 6 months have a nominal rate of 2%. In the spot exchange market, 1 yen equals $0.0059. If interest rate parity holds, what is the 6-month forward exchange r..

What is the pretax cost of debt-aftertax costs of debt : Jiminy’s Cricket Farm issued a bond with 15 years to maturity and a semiannual coupon rate of 10 percent 4 years ago. The bond currently sells for 91 percent of its face value. The company’s tax rate is 35 percent. What is the pretax cost of debt? Wh..

Evaluating the stadium project : Fairfax Pizza sells pizza in Northern Virginia and is evaluating the stadium project, which would involve selling pizza in the baseball stadium for 2 years, starting today. Based on the following information, what is the net present value of the stad..

What is firm pro forma times interest earned ratio : As CFO of Nile Holdings, a carpet wholesaler, you have the following information as of December 2011: Nile has an attractive investment opportunity, and to finance it, must decide whether to issue $100 million in new debt or new equity. Assume Nile r..

Organization can engage in to accomplish these goals : Suppose firm XYZ has AR (Accounts Receivable) = 500, Sales = 3000, Inventory = 300, Cost of Goods Sold = 1200, and AP (Accounts Payable) = 100. How much cash does firm XYZ save if it reduces its Days Sales Outstanding by 10 days? What are specific ac..

What would the after-tax cash flow be from equipment sale : Today, Litchfield Design purchased a piece of equipment for 82,000 dollars that will be depreciated to 14,000 dollars over 17 years using straight-line depreciation. What would the after-tax cash flow be from the equipment sale if the equipment is so..

The level of net working capital is expected : For project A, the cash flow effect from the change in net working capital is expected to be -100 dollars at time 2, the level of net working capital is expected to be 1,000 dollars at time 0, and the level of net working capital is expected to be 1,..

Cash flow effect from the change in net working capital : For project A, the cash flow effect from the change in net working capital is expected to be -300 dollars at time 2 and the level of net working capital is expected to be 1,600 dollars at time 2. What is the level of current liabilities for project A..

User Account

All Pages