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
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: 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..
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