Question

In: Finance

Consolidated industries has total interest charges of $42,800 per year. sales of $2.8 million which can generate an after-tax profit of 9.4% of sales. the

Consolidated industries has total interest charges of $42,800 per year. sales of $2.8 million which can generate an after-tax profit of 9.4% of sales. the firm applies a tax rate of 34%. what is the firm’s times-interest-earned ratio?

Expert Solution

Times-interest earned ratio is the ratio between the Earnings Before Interest and Taxes (EBIT) and interest expenses.

Sales = $2,800,000

After-tax profit = 0.094 * $2,800,000

= $263,200

Before tax profit = After-tax profit / (1 - tax rate)

= $263,200 / (1 - 0.34)

= $398,787.88

EBIT = Before tax profit + Interest (interest is added to calculate EBIT because it was deducted intially to arrive at taxable profit)

EBIT = $398,787.88 + $42,800

= $441,587.88

Times interest earned ratio = EBIT / Interest expense

= $441,587 / $42,800

= 10.32

Thus, answer is 10.32 .

Times interest earned ratio is 10.32.

Junaid answered 1 year ago

For the year ended 31 December 2016 a company earned a profit after interest and tax...

For the year ended 31 December 2016 a company earned a profit after interest and tax of £480,000. The company’s share price is £12 per share. The following are extracts from the company’s Statement of financial position at 31 December 2016: Ordinary share capital (50p shares) £200,000 Retained earnings £380,000 Revaluation reserve £80,000 Long-term 10% Bank loan £48,000 The company’s price earnings (PE) number and return on equity for the period were:

A firm has a profit margin of 2% and an equity multiplier of 2.9. Its sales are $200 million, and it has total assets of $120 million.

4. A firm has a profit margin of 2% and an equity multiplier of 2.9. Its sales are $200 million, and it has total assets of $120 million. What is its ROE? Do not round intermediate calculations. Round your answer to two decimal places.

A project has the following total (or net) after-tax cash flows. ____________________________________________________ Year&nbs

A project has the following total (or net) after-tax cash flows. ____________________________________________________ Year Total (or net) after-tax cash flow ____________________________________________________ 1 $1,000,000 2 1,500,000 3 2,000,000 4 2,500,000 _______________________________________________________ The required rate of return on the project is 15 percent. The initial investment (or initial cost or initial outlay) of the project is $4,000,000. a) Find the (regular) payback period of the project. b) Compute the discounted payback period of the project. c) Find...

Machine B costs $16 million and will provide after-tax inflows of $6.5 million per year for 8 years. If the WACC is 9%, which machine should be acquired?

You are considering two mutually exclusive projects which can be repeated. A costs $15 million but will provide inflows of $5.5 million per year for 4 years. If Machine A was replaced, its cost would be $18 million and its cash inflows would increase to $7.2 million due to production efficiencies. Machine B costs $16 million and will provide after-tax inflows of $6.5 million per year for 8 years. If the WACC is 9%, which machine should be acquired? Use...

(Efficiency analysis) ALei Industries has credit sales of $145 million a year. ALei's management reviewed...

(Efficiency analysis) ALei Industries has credit sales of $145 million a year. ALei's management reviewed its credit policy and decided that it wants to maintain an average collection period of 40 days. a. What is the maximum level of accounts receivable that ALei can carry and have a 40-day average collection period? b. If ALei's current accounts receivable collection period is 50 days, how much would it have to reduce its level of accounts receivable in order to achieve...

ALei Industries has credit sales of $151 million a year. ALei's management reviewed its credit...

ALei Industries has credit sales of $151 million a year. ALei's management reviewed its credit policy and decided that it wants to maintain an average collection period of 40 days. a. What is the maximum level of accounts receivable that ALei can carry and have 40-day average collection period? b. If ALei's current accounts receivable collection period is 50 days, how much would it have to reduce its level of accounts receivable in order to achieve its goal of...

During the current year, Fco1 has total gross income of $10 million, including $400,000 of interest...

During the current year, Fco1 has total gross income of $10 million, including $400,000 of interest income that qualifies as foreign personal holding company income, and $9.6 million of gross income from the sale of goods that Fco1 manufactured in its country of incorporation. Fco2's current year earnings and profits are $30 million, which consists of $40 million of foreign personal holding company income and a $10 million loss from sales of goods that Fco2 manufactured in its country of...

Tara's textiles currently has credit sales of 360 million per year and a collection period of...

Tara's textiles currently has credit sales of 360 million per year and a collection period of 60 days. Assume that the price of Tara's products is $60 per unit and that the variable costs are $55 per unit. The firm is considering an accounts receivable charge that will result in a 20% increase in sales and a 20% increase in the average collection period. No changes in bad debt is expected. The firm's equal risk opportunity cost on its investment...

JPJ Corp has sales of $1.29 million, accounts receivable of $46,000, total assets of $5.17million(of which...

JPJ Corp has sales of $1.29 million, accounts receivable of $46,000, total assets of $5.17million(of which $3.19 million are fixed assets), inventory of $155,000, and cost of goods sold of $596,000. What are JPJ’s accounts receivable days? Fixed asset turnover? Total asset turnover? Inventory turnover?

ALei Industries has credit sales of $154 million a year. ALei's management reviewed its credit policy...

ALei Industries has credit sales of $154 million a year. ALei's management reviewed its credit policy and decided that it wants to maintain an average collection period of 40 days. a. What is the maximum level of accounts receivable that ALei can carry and have a 40 -day average collection period? b. If ALei's current accounts receivable collection period is 50 days, how much would it have to reduce its level of accounts receivable in order to achieve its goal...