Problem 2-10 In 2020, Natural Selection million of liabilities. Earnin million, the tax rate was 40 dividends were 30 cents a. Calculate the following Note: Round your ans Answer Liabilities-to-equity ratio Times-interest-earned rati Times burden covered b. What percentage dec sustained before failir Note: Round your ans Interest payment require Principal and interest rec Principal, interest, and co
Problem 2-10 In 2020, Natural Selection million of liabilities. Earnin million, the tax rate was 40 dividends were 30 cents a. Calculate the following Note: Round your ans Answer Liabilities-to-equity ratio Times-interest-earned rati Times burden covered b. What percentage dec sustained before failir Note: Round your ans Interest payment require Principal and interest rec Principal, interest, and co
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:Problem 2-10
In 2020, Natural Selection, a nationwide computer dating service, had $512 million of assets and $206
million of liabilities. Earnings before interest and taxes were $126 million, interest expense was $28.5
million, the tax rate was 40 percent, principal repayment requirements were $24.6 million, and annual
dividends were 30 cents per share on 21 million shares outstanding.
a. Calculate the following for Natural Selection:
Note: Round your answers to 2 decimal places.
Answer is complete and correct.
Liabilities-to-equity ratio
Times-interest-earned ratio
Times burden covered
0.67
4.42
1.81
b. What percentage decline in earnings before interest and taxes could Natural Selection have
sustained before failing to cover:
Note: Round your answers to 1 decimal place.
Answer is complete but not entirely correct.
Interest payment requirements?
Principal and interest requirements?
Principal, interest, and common dividend payments?
77.4
44.8
29.9
%
%
O
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