Question: Explain Answer A new firm is developing its business plan. It will require $565,00o of assets, and it projects $452,800 of sales and $354.300 of

Explain Answer

Explain Answer A new firm is developing its business plan. It will

A new firm is developing its business plan. It will require $565,00o of assets, and it projects $452,800 of sales and $354.300 of operating costs for the first year. Management is quite sure of these numbers because of contracts with its customers and suppliers. It can borrow at a rate of 7.5%, but the bank requires it to have a E of at least 4 and if the TIE falls below this level the bank will call in the loan and the firm will go bankrupt. What is the maximum debt-to-assets ratio the firm can use? (Hint: Find the maximum dollars of interest, then the debt that produces that interest, and then the related debt ratio.) a. 49.8296 b. 47.3396 c. 52.45% d. 58.11% e. 55.21%

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