Question: Help! I worked on this for over an hour and still got it wrong and cannot figure out why As the chief financial officer of
Help! I worked on this for over an hour and still got it wrong and cannot figure out why
As the chief financial officer of Adirondack Designs, you have the following information:
Next years expected net income after tax but before new financing $ 46 million
Sinking-fund payments due next year on the existing debt $ 21 million
Interest due next year on the existing debt $ 16 million
Common stock price, per share $ 31.0
Common shares outstanding 26 million
Company tax rate 30%
a. Calculate Adirondacks times-interest-earned ratio for next year assuming the firm raises $56 million of new debt at an interest rate of 4 percent.
b.Calculate Adirondacks times-burden-covered ratio for next year assuming annual sinking-fund payments on the new debt will equal $5.5 million.
c.Calculate next years earnings per share assuming Adirondack raises the $56 million of new debt.
d. Calculate next years times-interest-earned ratio, times-burden-covered ratio, and earnings per share if Adirondack sells 2.1 million new shares at $27 a share instead of raising new debt.
a. Times interest earned -
b. Times Burden Covered-
c. Earnings per share-
d. times interest earned-
d. times burden covered-
d. earnings per share-
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