Question 9

In its most recent financial statements Driver Enterprises reported earnings before interest and taxes (EBIT) of $318 million and interest expense of $27 million. Included among its operating expenses reported on the income statement were lease expenses of $32 million. In a footnote Driver reported it had 7 years of future lease obligations averaging $20 million per year. The company faces a cost of debt of 6%. Calculate the fixed charge coverage ratio after incorporating the valuation of the lease obligations and the additional financing expenses associated with the leases. Present your answer rounded to two decimal places, e.g., 9.87.