MPI Incorporated has $4 billion in assets, and its tax rate is 35%. Its basic earning power (BEP) ratio is 12%, and its return on assets (ROA) is 3%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below.
MPI Incorporated has $4 billion in assets, and its tax rate is 35%. Its basic earning power (BEP) ratio is 12%, and its return on assets (ROA) is 3%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below.
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
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Transcribed Image Text:MPI Incorporated has $4 billion in assets, and its tax rate is 35%. Its basic earning power (BEP) ratio is 12%, and its return on assets (ROA) is
3%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the
question below.
Open spreadsheet
What is MPI's times-interest-earned (TIE) ratio? Round your answer to two decimal places.
Expert Solution
Step 1
EBIT = BEP ratio * Assets = 0.12 * $4 billion = $0.48 billion
Net income = ROA * Assets = 0.03 * $4 billion = $0.12 billion
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