Times-interest-earned (TIE) ratio. Introduction: Times-Interest-earned (TIE) Ratio: It represents the firm’s capacity to pay its interest expenses. It is calculated by dividing the earnings before interest and tax to interest expense.

Question

Crenshaw, Incorporated, is considering the purchase of a $367,000 computer with an economic life of five years. The computer will be fully depreciated over five years using the straight-line method. The market value of the computer will be $67,000 in five years. The computer will replace five office employees whose combined annual salaries are $112,000. The machine will also immediately lower the firm's required net working capital by $87,000. This amount of net working capital will need to be replaced once the machine is sold. The corporate tax rate is 22 percent. The appropriate discount rate is 15 percent. Calculate the NPV of this project. Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. NPV Answer is complete but not entirely correct. S 103,141.80

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Question

Chapter 4, Problem 12P

Summary Introduction

To determine: Times-interest-earned (TIE) ratio.

Introduction:

Times-Interest-earned (TIE) Ratio:

It represents the firm’s capacity to pay its interest expenses. It is calculated by dividing the earnings before interest and tax to interest expense.

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