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# if a probability is less than the smallest number on the chart, just answer the question < 0.10% (smallest value on the chart) or you can find the probability using Excel. What is the probability of Coverage Ratio (CR) < 1.0? What is the probability of a CR < 3.0 What is the maximum amount of debt the company

if a probability is less than the smallest number on the chart, just answer the question “< 0.10%” (smallest value on the chart) or you can find the probability using Excel.

- What is the probability of Coverage Ratio (CR) < 1.0?
- What is the probability of a CR < 3.0
- What is the maximum amount of debt the company can service and have a 3% probability that the coverage ratio will fall to 1.0 or less?
- What is the maximum amount of debt the company can service and have a 10% probability that the coverage ratio will fall to 1.0 or less?
- If the interest rate on debt is 14% instead of 12% and all other values in Table 1 are in effect, what is the probability of having a coverage ratio less than 1.0?
- If the interest rate is 14%, what debt ratio corresponds to a probability of a CR < 1 of 15%?
- What is the probability that the company’s EBIT will be 0 or less? (hint: an EBIT of 0 corresponds what value for ROA? Calculate a Z-score for that ROA)
- Table 1. Given information

Expected ROA | 16% |

STD DEV ROA | 4% |

Assets | $8,000 M |

Interest rate | 12% |

Debt | $2,000 M |

**Related Book For**

## College Mathematics for Business Economics Life Sciences and Social Sciences

12th edition

Authors: Raymond A. Barnett, Michael R. Ziegler, Karl E. Byleen

ISBN: 978-0321614001

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