As the chief financial officer of Adirondack Designs, you have the following information: Next year's expected net income after tax but before new financing Sinking-fund payments due next year on the existing debt Interest due next year on the existing debt Common stock price, per share Common shares outstanding Company tax rate $ 42 million $ 17 million $ 12 million $ 29.0 22 million 30% a. Calculate Adirondack's times-interest-earned ratio for next year assuming the firm raises $52 million of new debt at an interest rate of 4 percent. b. Calculate Adirondack's times-burden-covered ratio for next year assuming annual sinking-fund payments on the new debt will equal $5.5 million. c. Calculate next year's earnings per share assuming Adirondack raises the $52 million of new debt. d. Calculate next year's times-interest-earned ratio, times-burden-covered ratio, and earnings per share if Adirondack sells 1.7 million new shares at $27 a share instead of raising new debt. Note: Do not round intermediate calculations. Round "Earnings per share" answers to 2 decimal places and other answers to 1 decimal place. a. Times interest earned b. Times burden covered c. Earnings per share d. Times interest earned d. Times burden covered d. Earnings per share
As the chief financial officer of Adirondack Designs, you have the following information: Next year's expected net income after tax but before new financing Sinking-fund payments due next year on the existing debt Interest due next year on the existing debt Common stock price, per share Common shares outstanding Company tax rate $ 42 million $ 17 million $ 12 million $ 29.0 22 million 30% a. Calculate Adirondack's times-interest-earned ratio for next year assuming the firm raises $52 million of new debt at an interest rate of 4 percent. b. Calculate Adirondack's times-burden-covered ratio for next year assuming annual sinking-fund payments on the new debt will equal $5.5 million. c. Calculate next year's earnings per share assuming Adirondack raises the $52 million of new debt. d. Calculate next year's times-interest-earned ratio, times-burden-covered ratio, and earnings per share if Adirondack sells 1.7 million new shares at $27 a share instead of raising new debt. Note: Do not round intermediate calculations. Round "Earnings per share" answers to 2 decimal places and other answers to 1 decimal place. a. Times interest earned b. Times burden covered c. Earnings per share d. Times interest earned d. Times burden covered d. Earnings per share
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter16: Financial Planning And Forecasting
Section: Chapter Questions
Problem 8P: LONG-TERM FINANCING NEEDED At year-end 2019, total assets for Arrington Inc. were 1.8 million and...
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Transcribed Image Text:As the chief financial officer of Adirondack Designs, you have the following information:
Next year's expected net income after tax but before new financing
Sinking-fund payments due next year on the existing debt
Interest due next year on the existing debt
Common stock price, per share
Common shares outstanding
Company tax rate
$ 42 million
$ 17 million
$ 12 million
$ 29.0
22 million
30%
a. Calculate Adirondack's times-interest-earned ratio for next year assuming the firm raises $52 million of new debt at an interest rate
of 4 percent.
b. Calculate Adirondack's times-burden-covered ratio for next year assuming annual sinking-fund payments on the new debt will equal
$5.5 million.
c. Calculate next year's earnings per share assuming Adirondack raises the $52 million of new debt.
d. Calculate next year's times-interest-earned ratio, times-burden-covered ratio, and earnings per share if Adirondack sells 1.7 million
new shares at $27 a share instead of raising new debt.
Note: Do not round intermediate calculations. Round "Earnings per share" answers to 2 decimal places and other answers to 1
decimal place.
a. Times interest earned
b. Times burden covered
c. Earnings per share
d. Times interest earned
d. Times burden covered
d. Earnings per share
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