What is interest coverage

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A. An equity investor is considering purchasing a company which has $1,200 of EBITDA for an 8x multiple. The investor is willing to invest $3,000. How much debt is required? Assuming 3 years from now EBITDA is $1,400 and the company is sold for an 8x multiple, what will be the equity return assuming no debt paydown?

B. A company with EBITDA of $1,200 is purchased for an 8x multiple, financed with $6,000 of debt. How much equity is used to finance the purchase? Assuming the company reports interest expense of $240 on its income statement, what is interest coverage?

Reference no: EM132681642

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