ADM Pty Ltd has Total Assets of R850 000. Debt ratio for the firm is 80% of which 70% is long term liabilities. The Asset turnover is 6, net profit margin is 12%, the interest rate is 8% and tax rate is 40% for the firm. Calculate the following for the firm: 1. Interest expense for the firm 2. Earnings before interest and tax
ADM Pty Ltd has Total Assets of R850 000. Debt ratio for the firm is 80% of which 70% is long term liabilities. The Asset turnover is 6, net profit margin is 12%, the interest rate is 8% and tax rate is 40% for the firm. Calculate the following for the firm: 1. Interest expense for the firm 2. Earnings before interest and tax
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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ADM Pty Ltd has Total Assets of R850 000. Debt ratio for the firm is 80% of which 70% is long term liabilities. The Asset turnover is 6, net profit margin is 12%, the interest rate is 8% and tax rate is 40% for the firm.
Calculate the following for the firm:
1.
Interest expense for the firm
2. Earnings before interest and tax
Expert Solution
Step 1Analysis
First we need to use debt ratio to calculate total debt
Debt ratio=Total debt/Total assets
Now Long term debt =Total debt* longterm debt%
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