The management of National Utility Company has applied for a $550,000 commercial loan to purchase additional leased
Question:
The management of National Utility Company has applied for a $550,000 commercial loan to purchase additional leased vehicles for its expanding business. The commercial loan office has requested and received the following itemized financial information to perform the due diligence:
The company generates Earnings Before Interest, Taxes, Depreciation & Amortization of $750,700
The company pays $85,000 in taxes for the current year
The company pays annual interest expense of $95,000 on its loans
The company spends $10,000 annually to replace some of its Property, Plants, and Equipment's
The company pays annual lease principal payments of $110,000
The company pays monthly lease payments of $3,000 for its fleet of vehicle
a. Please calculate the Fixed-Charged Coverage (show your work for full points) (35%)
b. Should the loan officer approve the loan request?
Expert Answer:
Given Monthly Expense Lease payments 3000 Annual Expenses Annual EBITDA 750700 Annual interes... View the full answer
