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 $ 48 million $ 23 million $ 18 million $ 32.0 28 million 40% a. Calculate Adirondack's times-interest-earned ratio for next year assuming the firm raises $58 million of new debt at an of 3 percent. b. Calculate Adirondack's times-burden-covered ratio for next year assuming annual sinking-fund payments on the new $4.5 million
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 $ 48 million $ 23 million $ 18 million $ 32.0 28 million 40% a. Calculate Adirondack's times-interest-earned ratio for next year assuming the firm raises $58 million of new debt at an of 3 percent. b. Calculate Adirondack's times-burden-covered ratio for next year assuming annual sinking-fund payments on the new $4.5 million
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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Question
am. 124.
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
$ 48 million
$ 23 million
$ 18 million
$ 32.0
28 million
40%
a. Calculate Adirondack's times-interest-earned ratio for next year assuming the firm raises $58 million of new debt at an interest rate
of 3 percent.
b. Calculate Adirondack's times-burden-covered ratio for next year assuming annual sinking-fund payments on the new debt will equal
$4.5 million.
c. Calculate next year's earnings per share assuming Adirondack raises the $58 million of new debt.
d. Calculate next year's times-interest-earned ratio, times-burden-covered ratio, and earnings per share if Adirondack sells 2.3 million
new shares at $25 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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