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Consider the following: net operating profit after taxes = $450,000, total assets = $1,000,000, interest    ...

Consider the following: net operating profit after taxes = $450,000, total assets = $1,000,000, interest

    expenses = $100,000, book value (net worth) = $600,000, current liabilities = $150,000, short-term debt

    (notes payable) = $0, tax rate = 25%

a. Calculate the interest coverage ratio.

b. Calculate the dollar value of long-term debt on the balance sheet.

c. Calculate the equity multiplier ratio

d. Management intends to partially finance a growth opportunity using long-term debt. The bond contract requires that the sum of current liabilities plus long-term debt must not exceed 50% of total assets (as reported on the most recent balance sheet). Calculate the maximum dollar amount of new long-term debt.

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