hoose the correct letter of answer: The following data applies to a firm: Interest Charges P10 Million, Sales/CGS P80 Million, Tax Rate 50% and Net profit margin 10%. What is the firm's interest covered ration? a. 1.6 b. 2.6 c. 3.6 d. 4.6 e. 5.6

hoose the correct letter of answer: The following data applies to a firm: Interest Charges P10 Million, Sales/CGS P80 Million, Tax Rate 50% and Net profit margin 10%. What is the firm's interest covered ration? a. 1.6 b. 2.6 c. 3.6 d. 4.6 e. 5.6

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter6: Accounting For Financial Management

Section: Chapter Questions

Problem 3P

See similar textbooks

Related questions

Q: 2) A financial analyst at AzTurk LLC wants to compute the company's value using FCF method. The…

A: Value of Company for perpetual FCF = FCF/WACC WACC = Weighted Average Cost of Capital FCF =…

Q: The WACC for a firm is 19.75 percent. You know that the firm is financed with OMR 75 million of…

A: Introduction WACC( Weighted Average Cost Of Capital) The Weighted Average Cost of Capital (WACC) of…

Q: (Computing interest tax savings) Dharma Supply has earnings before interest and taxes (EBIT) of…

A: The net income is calculated as EBIT less interest expense and taxes.

Q: A. ABC Corp., expects a net income of Php. 250,000. The company has 10% of 5,000,000 Debentures. The…

A: Hi student Since there are multiple questions, we will answer only first question. If you want…

Q: Rain company whose tax rate is 40% has a total asset of P500,000,000 and earnings before interest…

A: Interest Payment is calculated on the debt part out of the total funds of the company. Net Income is…

Q: what is its WACC

A: WACC (Weighted average cost of capital): WACC is also known as the firm's average cost of capital…

Q: 3 points Save Answer Goremann Corp (GC) has a total market value of $524 million. The market value…

A: The company is operating activities for the purpose of gain profit. The profit is then distributed…

Q: With a firm’s sales revenue of $500,000 and earnings before interest and tax (EBIT) $100,000 and…

A: The Times Interest Earned (TIE) ratio measures a company’s ability to meet its debt obligations…

Q: Choose the correct letter of answer and provide a solution A firm has profit before tax of P63…

A: Interest coverage ratio is a financial ratio which determines how well a company can pay the…

Q: 1. Determine the present value of the interest tax shield of Shop Right Plc as well as the total…

A: Net Income Theory(NI) is an important theory of capital structure. It was developed by David…

Q: financing strategy

A: Income before interest and taxes P2 million Interest expense (P2.52 million) Net loss (P0.52…

Q: ADM Pty Ltd has Total Assets of R850 000. Debt ratio for the firm is 80% of which 70% is long term…

Q: Intro Munding Corp. has debt with a market value of $23 million and equity with a market value of…

A: Weighted Average Cost Capital means the cost which was borne by the company in overall terms for…

Q: Table1: Information of the firms Unlevered firm Levered firm EBIT :10000 :10000 Interest…

A: Part A) Fill in the blanks : Putting values above :

Q: Company X has debt and equity as sources of funds. Company X has market value of debt as $150,000…

A: Weighted Average Cost of Capital is the firm’s cost of capital in each category of capital is…

Q: The company CapStar Pic has an expected EBIT of E145,000 in perpetuity. and its untevered cost of…

A: Given: Expected EBIT = 145000 Unlevered cost of capital = 10% Outstanding debt = 100000 Interest…

Q: The following data applies to a firm: Interest charges=P50,000.00; Sales = P300,000.00; Tax…

A: Here in this case we are required to calculate interest covered ratio. We first need to understand…

Q: Russell Securities has $125 million in total assets and its corporate tax rate is 40%. The company…

Q: a firm's financial data shows the following: Equity = $8,000 Debt = $2,000 Re = 12.5% Rd = 6% Tax…

A: The weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which…

Q: Shi Import-Export's balance sheet shows $300 million in debt, $50 million in preferred stock, and…

A: wacc formula: WACC=Wdebt×rd×1-tax+wps×rps+ws×rswhere,wd= weight of debtwps= weight of preferred…

Q: There are two firms: Firm U and Firm L. Both firms have $100M total assets and $15M EBIT (eamings…

A: Return on Equity can be calculated as follows. Return on Equity = (Profit available for equity /…

Q: Calculate the WACC for a firm that pays 10% on its debt, requires an 18% rate of return on its…

A: The Weighted average cost of capital(WACC) refers to the method in which each category of capital is…

Q: total sales of $340,000. And a net income after tax of $47,600. Calculate the operating margin if…

A: To calculate the operating margin we need to calculate the operating income.Operating Income is an…

Q: A firm has EBIT of R375,000, interest expense of R75,000, preferred dividends of R6,000 and a tax…

A: Leverage is an investment technique that involves the use of borrowed money—specifically, the use of…

Q: 50

A: WACC = Weight of debt * Cost of debt + Weight of preferred stock * Cost of preferred stock + Weight…

Q: The financial breakeven point of Soil Inc. is P90,000, while the tax rate applicable to the company…

A: At financial breakeven point, EBIT level is such that net income is zero. EBIT = P 90000 Tax rate =…

Q: The EBIT of the unlevered company is OMR 60,000; cost of equity of unlevered company is 8% and the…

A: Modigliani-Miller model is the theory used to find the relationship between the value of a firm and…

Q: Assume that personal and corporate taxes are given by: TC = (corporate tax rate) = 30 percent; TPS=…

A: Effective Tax Advantage: In presence of personal taxes on either interest or equity income, the…

Q: Take It All Away has a cost of equity of 10.75 percent, a pretax cost of debt of 5.41 percent, and a…

A: Weighted Average Cost of Capital(WACC) is calculated by considering the proportionate capital…

Q: What is the EPS in the following case? Debt : Equity ratio = 3:1 Total Capital employed =…

A: Earnings per share is calculated by dividing the earnings available for equity shareholders with the…

Q: The tax rate applicable to Blue Co. is 20%. The firm pays 5% interest on the P350,000 outstanding…

Q: Banana Airways. has an expected EBIT of $1,515,000 in perpetuity and tax rate of 25%. The Banana's…

Q: What would be a company's "timesInterest earned ratio if interest paid on loans amount to P9.000 and…

A: Times Interest Earned Ratio=Net Income before interest and taxInterest Expense

Q: A company has $20 billion of sales and $1 billion of net income. Its total assets are $10 billion.…

A: The net income of the company= $ 1,000,000,000 Tax rate=40% Total Assets = $10,000,000,000

Q: A new company plans to obtain P18 million financing. The company expects to obtain a yearly income…

A: The financing strategy deals with the fundamental steps taken by an organization in order to achieve…

Q: Company X has debt and equity as source of funds..Company X has market value of debt as $ 150000 and…

A: WACC is weighted average cost of capital including cost of equity and after tax cost of debt.So you…

Q: 3. ENN Corporation has interest expense of P16,000, sales of P600,000, a taxrate of 30%, and…

A: Dear You have asked 2 questions in one slot. So, I have solved 1st means Question no. 3 as per…

Question

Choose the correct letter of answer:

The following data applies to a firm: Interest Charges P10 Million, Sales/CGS P80 Million, Tax Rate 50% and Net profit margin 10%. What is the firm's interest covered ration?
a. 1.6
b. 2.6
c. 3.6
d. 4.6
e. 5.6

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

Brower Co. is considering the following alternative financing plans: Income tax is estimated at 40% of income. Determine the earnings per share of common stock, assuming that income before bond interest and income tax is 2,000,000.
Whirlpool manufactures and sells home appliances under various brand names. IBM develops and manufactures computer hardware and offers related technology services. Target operates a chain of general merchandise discount retail stores. The data in the following table apply to these companies (dollar amounts in millions). For each firm, assume that the market value of the debt equals its book value. REQUIRED a. Assume that the intermediate-term yields on U.S. government Treasury securities are 3.5%. Assume that the market risk premium is 5.0%. Compute the cost of equity capital for each of the three companies. b. Compute the weighted-average cost of capital for each of the three companies. c. Compute the unlevered market (asset) beta for each of the three companies. d. Assume that each company is a candidate for a potential leveraged buyout. The buyers intend to implement a capital structure that has 75% debt (with a pretax borrowing cost of 8.0%) and 25% common equity. Project the weighted-average cost of capital for each company based on the new capital structure. To what extent do these revised weighted-average costs of capital differ from those computed in Requirement b?
Suppose a firm makes purchases of $3.65 million per year under terms of 2/10, net 30, and takes discounts. What is the average amount of accounts payable net of discounts? (Assume the $3.65 million of purchases is net of discounts—that is, gross purchases are $3,724,489.80, discounts are $74,489.80, and net purchases are $3.65 million.) Is there a cost of the trade credit the firm uses? If the firm did not take discounts but did pay on the due date, what would be its average payables and the cost of this nonfree trade credit? What would be the firm’s cost of not taking discounts if it could stretch its payments to 40 days?
Choose the correct letter of answer and provide solution The following data applies to a firm: Interest charges=P50,000.00; Sales = P300,000.00; Tax Rate=P25%; Net Profit Margin=3%. What is the firm's time interest covered ratio? a. 0.24b. 0.54c. 1.04d. 1.24e. 1.44
Choose the correct letter of answer: In the current year, Company A had P15 Million in sales, while total fixed costs were held to P6 Million. The firm's total assets at year-end were P20 Million and the debt/equity ratio was calculated at 0.60. If the firm's EBIT is P3 Million, the interest on all debt is 9%, and the tax rate is 40%, what is the firm's return on equity? a. 11.16%b. 14.4%c. 18.6%d. 24.0%e. 28.5%