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 $ 37 million $12 million $7 million $26.5 17 million 45% a. Calculate Adirondack's times-interest-earned ratio for next year assuming the firm raises $47 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 $3.0 million c. Calculate next year's earnings per share assuming Adirondack raises the $47 million of new debt d. Calculate next year's times-interest-earned ratio, times-burden-covered ratio, and earnings per share if Adirondack sells 1.2 million new shares at $22 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. Times interest earned b. Times burden covered c Earnings per share d. Times interest earned d Times burden covered d. Eamings 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 $ 37 million $12 million $7 million $26.5 17 million 45% a. Calculate Adirondack's times-interest-earned ratio for next year assuming the firm raises $47 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 $3.0 million c. Calculate next year's earnings per share assuming Adirondack raises the $47 million of new debt d. Calculate next year's times-interest-earned ratio, times-burden-covered ratio, and earnings per share if Adirondack sells 1.2 million new shares at $22 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. Times interest earned b. Times burden covered c Earnings per share d. Times interest earned d Times burden covered d. Eamings per share
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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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
$ 37 million
$12 million
$7 million
$26.5
17 million
45%
a. Calculate Adirondack's times-interest-earned ratio for next year assuming the firm raises $47 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
$3.0 million
c. Calculate next year's earnings per share assuming Adirondack raises the $47 million of new debt
d. Calculate next year's times-interest-earned ratio, times-burden-covered ratio, and earnings per share if Adirondack sells 1.2 million
new shares at $22 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.
Times interest earned
b.
Times burden covered
c
Earnings per share
d.
Times interest earned
d
Times burden covered
d. Eamings per share
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