Pop Evil, Inc.'s, net income for the most recent year was $10,131. The tax rate was...

Pop Evil, Inc.'s, net income for the most recent year was $10,131. The tax rate was 24 percent. The firm paid $3,490 in total interest expense and deducted $2,101 in depreciation expense. What was the cash coverage ratio for the year?

Expert Solution

(EBIT-interest expense)(1-tax rate)=Net income

(EBIT-3490)(1-0.24)=10,131

(EBIT-3490)=10,131/0.76

EBIT=(10,131/0.76)+3490

=$16820.2632

Cash coverage ratio=(EBIT+depreciation)/interest expense

=(16820.2632+2101)/3490

=5.42(Approx)

jeff jeffy answered 2 years ago

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