As the chief financial officer of Adirondack Designs, you have the following information: Next year's expected net income after tax but before new financing Sinking-fund payments due next year on the existing debt Interest due next year on the existing debt Common stock price, per share Common shares outstanding Company tax rate $:36 million $ 11 million $6 million $ 26.0 a. Calculate Adirondack's times-interest-earned ratio for next year assuming the firm raises $46 million of new debt at an interest rate of 3 percent. b. Calculate Adirondack's times-burden-covered ratio for next year assuming annual sinking-fund payments on the new debt will equal $2.5 million. a. b. c. d. d. 16 million 40% c. Calculate next year's earnings per share assuming Adirondack raises the $46 million of new debt. d. Calculate next year's times-interest-earned ratio, times-burden-covered ratio, and earnings per share if Adirondack sells 1.1 million new shares at $21 a share instead of raising new debt. Times interest earned Times burden covered Earnings per share Times interest earned Times burden covered Earnings per share Note: Do not round intermediate calculations. Round "Earnings per share" answers to 2 decimal places and other answers to 1 decimal place.
As the chief financial officer of Adirondack Designs, you have the following information: Next year's expected net income after tax but before new financing Sinking-fund payments due next year on the existing debt Interest due next year on the existing debt Common stock price, per share Common shares outstanding Company tax rate $:36 million $ 11 million $6 million $ 26.0 a. Calculate Adirondack's times-interest-earned ratio for next year assuming the firm raises $46 million of new debt at an interest rate of 3 percent. b. Calculate Adirondack's times-burden-covered ratio for next year assuming annual sinking-fund payments on the new debt will equal $2.5 million. a. b. c. d. d. 16 million 40% c. Calculate next year's earnings per share assuming Adirondack raises the $46 million of new debt. d. Calculate next year's times-interest-earned ratio, times-burden-covered ratio, and earnings per share if Adirondack sells 1.1 million new shares at $21 a share instead of raising new debt. Times interest earned Times burden covered Earnings per share Times interest earned Times burden covered Earnings per share Note: Do not round intermediate calculations. Round "Earnings per share" answers to 2 decimal places and other answers to 1 decimal place.
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter10: Forecasting Financial Statement
Section: Chapter Questions
Problem 8QE
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Question
Gg.20.
Transcribed Image Text:As the chief financial officer of Adirondack Designs, you have the following information:
Next year's expected net income after tax but before new financing
Sinking-fund payments due next year on the existing debt
Interest due next year on the existing debt.
Common stock price, per share
Common shares outstanding
Company tax rate.
$ 36 million
$ 11 million.
$6 million
a. Calculate Adirondack's times-interest-earned ratio for next year assuming the firm raises $46 million of new debt at an interest rate
of 3 percent.
b. Calculate Adirondack's times-burden-covered ratio for next year assuming annual sinking-fund payments on the new debt will equal
$2.5 million.
Times interest eamed
Times burden covered
$26.0
c. Calculate next year's earnings per share assuming Adirondack raises the $46 million of new debt.
d. Calculate next year's times-interest-earned ratio, times-burden-covered ratio, and earnings per share if Adirondack sells 1.1 million
new shares at $21 a share instead of raising new debt.
a.
b.
C Earnings per share
d
d.
d
16 million.
40%
Note: Do not round intermediate calculations. Round "Earnings per share" answers to 2 decimal places and other answers to 1
decimal place.
Times interest earned
Times burden covered
Earnings per share
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