Calculate the fixed burden coverage and cash-flow-to-debt ratio given the following: EBIT = $700,000; depreciation and amortization = $60,000; preferred dividend $50,000; sinking fund payments = $10,000; tax rate = 20%; debt = $200,000. Why do analysts use EBITDA more often than EBIT?
Answer to relevant QuestionsCalculate Altman’s Z score for Home Depot in fiscal year 2011 (as of January 29, 2012) and then compare it with Moody’s rating chart. Is this company an IG or non-IG? All numbers are inmillions.In the M&M no-tax world, an unlevered firm has a cost of equity of 10 percent and expected EBIT of $375,000. The firm decided to issue $2 million of debt at a cost of 6 percent to finance a project, which has an ROI of 15 ...Explain how the static trade-off model can be used to find an optimal capital structure.With reference to the M&M irrelevance theorem, calculate the market value of an unlevered firm (U) and an identical risk-levered firm (L). The expected EBIT of the unlevered firm (U) = $1.5 million, which will remain ...Assume that the shareholders of a firm pay a net tax of 30 percent on cash dividends received. After-tax earnings have been constant at $10 per share. The firm pays out all earnings in dividends at the end of each year. The ...
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