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 $ 49 million $ 24 million $ 19 million $ 32.5 29 million 45% a. Calculate Adirondack's times-interest-earned ratio for next year assuming the firm raises $59 million of new debt at an interest rate of 5 percent. b. Calculate Adirondack's times-burden-covered ratio for next year assuming annual sinking-fund payments on the new debt will equal $4.0 million. c. Calculate next year's earnings per share assuming Adirondack raises the $59 million of new debt. d. Calculate next year's times-interest-earned ratio, times-burden-covered ratio, and earnings per share if Adirondack sells 2.4 million new shares at $24 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. Answer is complete but not entirely correct. a. Times interest earned 5.1 b. Times burden covered 1.5 c. Earnings per share $ 1.69 d. Times interest earned d. Times burden covered 5.7 x 1.7 x d. Earnings per share $ 1.56
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 $ 49 million $ 24 million $ 19 million $ 32.5 29 million 45% a. Calculate Adirondack's times-interest-earned ratio for next year assuming the firm raises $59 million of new debt at an interest rate of 5 percent. b. Calculate Adirondack's times-burden-covered ratio for next year assuming annual sinking-fund payments on the new debt will equal $4.0 million. c. Calculate next year's earnings per share assuming Adirondack raises the $59 million of new debt. d. Calculate next year's times-interest-earned ratio, times-burden-covered ratio, and earnings per share if Adirondack sells 2.4 million new shares at $24 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. Answer is complete but not entirely correct. a. Times interest earned 5.1 b. Times burden covered 1.5 c. Earnings per share $ 1.69 d. Times interest earned d. Times burden covered 5.7 x 1.7 x d. Earnings per share $ 1.56
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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