Question: Wolken Corporation has 500 000 of debt outstanding and it pays
Wolken Corporation has $500,000 of debt outstanding, and it pays an interest rate of 10 percent annually. Wolken’s annual sales are $2 million; its average tax rate is 20 percent; and its net profit margin is 5 percent. If the company does not maintain a TIE ratio of at least 5.0 times, its bank will refuse to renew the loan and bankruptcy will result. What is Wolken’s TIE ratio?
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