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
Financial Accounting
14th Edition
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Carl Warren, Jim Reeve, Jonathan Duchac
Chapter14: Long-term Liabilities: Bonds And Notes
Section: Chapter Questions
Problem 1PEA
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Question
Can you please help me with question (d)? My answers seem to be incorrect
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
$ 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
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