A company has the following profile.  Solve/respond to the the questions below. Please show your calculations for partial credit.  

Net Income - $375,000
Bank Debt - $1,000,000 @ 6%
Equity - $3,000,000 @ 12% 
EBITDA - $500,000
Tax Rate = 25% 

1) What is the cost of debt for this company? 
2) What is the company's overall capital structure (% of debt, % of equity)?
3) What is the company's leverage ratio if measured by Total Debt to EBITDA?
4) If the company made $375,000 in net income, how much would the company pay in taxes using the tax rate above?
5) If the company distributed 30% of the $375,000 net income, how much in distributions did they make? 
6) Using the figures from #4 and #5, how much of the net income remained in the company for growth capital? 

BONUS - How much in interest, depreciation, & amortization did the company have based on the net income and 25% tax (do not calculate interest)?

Answer rating: 100% (QA)

The cost of debt for the company can be calculated using the formula Cost of Debt Interest Expense Average Debt Given Bank Debt 1000000 Interest Rate ... View the full answer