EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 3, Problem 17P
a)
Summary Introduction
To determine: Present coverage ratio (times interest earned).
b)
Summary Introduction
To determine: Additional debt and additional interest.
c)
Summary Introduction
To determine: Unused debt capacity of the company.
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Sun Minerals, Inc., is considering issuing additional long-term debt to finance an expansion. Currently, the company has $50 million in 12 percent debt
outstanding. Its after-tax net income is $12 million, and the company is in the 40 percent tax bracket. The company is required by the debt holders to
maintain its times interest earned ratio at 3.7 or greater. Do not round intermediate calculations.
a. What is the present coverage (times interest earned) ratio? Round your answer to one decimal place.
times
b. How much additional 12 percent debt can the company issue now and maintain its times interest earned ratio at 3.7? (Assume for this calculation that
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$
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c. If the interest rate on additional debt is 14 percent, how much unused "debt capacity" does the company…
ICU Window, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 9 years to maturity that is quoted at 107 percent of face value. The issue makes semiannual payments and has an embedded cost of 6.6 percent annually.
What is the company's pretax cost of debt? If the tax rate is 24 percent, what is the aftertax cost of debt?
Pretax cost of debt: __________%
Aftertax cost of debt: __________%
Sunrise, Incorporated, is trying to determine its cost of debt. The firm has a debt issue outstanding with 10 years to maturity that is quoted at 109 percent of face value. The issue makes semiannual payments and has an embedded cost of 7 percent annually.
What is the company's pretax cost of debt?
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Chapter 3 Solutions
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Ch. 3 - Prob. 1QTDCh. 3 - Prob. 2QTDCh. 3 - Prob. 3QTDCh. 3 - Prob. 4QTDCh. 3 - Prob. 5QTDCh. 3 - Prob. 6QTDCh. 3 - Prob. 7QTDCh. 3 - Prob. 8QTDCh. 3 - Prob. 9QTDCh. 3 - Prob. 10QTD
Ch. 3 - Prob. 11QTDCh. 3 - Prob. 12QTDCh. 3 - Prob. 13QTDCh. 3 - Prob. 14QTDCh. 3 - Prob. 1PCh. 3 - Prob. 2PCh. 3 - Prob. 3PCh. 3 - Prob. 4PCh. 3 - Prob. 5PCh. 3 - Prob. 6PCh. 3 - Prob. 7PCh. 3 - Prob. 8PCh. 3 - Prob. 9PCh. 3 - Prob. 10PCh. 3 - Prob. 11PCh. 3 - Prob. 12PCh. 3 - Prob. 13PCh. 3 - Prob. 14PCh. 3 - Prob. 15PCh. 3 - Prob. 16PCh. 3 - Prob. 17PCh. 3 - Prob. 18PCh. 3 - Prob. 19PCh. 3 - Prob. 20PCh. 3 - Prob. 21P
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