Question: Problem 4-18 Leverage Ratios (LO3) Lever Age pays an 8% rate of interest on $10 million of outstanding debt with face value $10 million. The

Problem 4-18 Leverage Ratios (LO3)

Lever Age pays an 8% rate of interest on $10 million of outstanding debt with face value $10 million. The firms EBIT was $1 million.

a.

What is times interest earned? (Round your answer to 2 decimal places.)

Times interest earned

b.

If depreciation is $200,000, what is cash coverage? (Round your answer to 2 decimal place.)

Cash coverage

c.

If the firm must retire $300,000 of debt for the sinking fund each year, what is its fixed-payment cash-coverage ratio (the ratio of cash flow to interest plus other fixed debt payments)? (Round your answer to 2 decimal places.)

Fixed-payment cash-coverage ratio

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