The Morrit Corporation has $480,000 of debt outstanding, and it pays an interest rate of 9% annually. Morrit's annual sales are $3 million, its average tax rate is 25%, and its net profit margin on sales is 6%. If the company does not maintain a TIE ratio of at least 3 to 1, then its bank will refuse to renew the loan, and bankruptcy will result. What is Morrit's TIE ratio? Do not round intermediate calculations. Round your answer to two decimal places.

The Morrit Corporation has $480,000 of debt outstanding, and it pays an interest rate of 9% annually. Morrit's annual sales are $3 million, its average tax rate is 25%, and its net profit margin on sales is 6%. If the company does not maintain a TIE ratio of at least 3 to 1, then its bank will refuse to renew the loan, and bankruptcy will result. What is Morrit's TIE ratio? Do not round intermediate calculations. Round your answer to two decimal places.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

The W.C. Pruett Corp. has $600,000 of interest-bearing debt outstanding, and it pays an annual interest rate of 7%. In addition, it has $600,000 of common equity on its balance sheet. It finances with only debt and common equity, so it has no preferred stock. Its annual sales are $2.7 million, its average tax rate is 25%, and its profit margin is 7%. What are its TIE ratio and its return on invested capital (ROIC)?
GHIJ Corporation is experiencing financial difficulties and a downward trend in its results of operations. The firm is unable to service its debt and as a result, has missed payment of an annual interest on its loan from CVB Company. The principal amount of the loan is P 5,000,000 (which is already due ) with annual interest of 10% payable annually. GHIJ Corporation’s management has negotiated a modification of its debt terms with its creditors. The creditors agree to the following new terms (assume that at this time, the prevailing market rate of interest remained at 11%): • Forgive all accrued interest. • Reduce the principal amount of the loan to P 4,000,000. • Extend the payment of principal for 3 years. • Reduce the interest rate for the remaining 3 years to 8% How much is the gain on debt restructuring?
None
Slush Corporation has two bonds outstanding, each with a face value of $3.4 million. Bond A is secured on the company's head office building; bond B is unsecured. Slush has suffered a severe downturn in demand. Its head office building is worth $1.14 million, but its remaining assets are now worth only $2 million. If the company defaults, what payoff can the holders of bond B expect? Note: Enter your answer in dollars, not in millions. Round your answer to the nearest whole dollar amount. Payoff of bond B
D4)
Slush Corporation has two bonds outstanding, each with a face value of $3.6 million. Bond A is secured on the company's head office building; bond B is unsecured. Slush has suffered a severe downturn in demand. Its head office building is worth $1.16 million, but its remaining assets are now worth only $2 million. If the company defaults, what payoff can the holders of bond B expect? Note: Enter your answer in dollars, not in millions. Round your answer to the nearest whole dollar amount. Payoff of bond B
answer quickly
7.
# 5 Fujita, Incorporated, has no debt outstanding and a total market value of $369,600. Earnings before interest and taxes, EBIT, are projected to be $51,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 15 percent higher. If there is a recession, then EBIT will be 24 percent lower. The company is considering a $185,000 debt issue with an interest rate of 6 percent. The proceeds will be used to repurchase shares of stock. There are currently 8,400 shares outstanding. The company has a tax rate of 24 percent, a market-to-book ratio of 1.0 before recapitalization, and the stock price changes according to M&M. a-1. Calculate earnings per share (EPS) under each of the three economic scenarios before any debt is issued. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) a-2. Calculate the percentage changes in EPS when the economy expands or enters a recession. (A…
Slush Corporation has two bonds outstanding, each with a face value of $2.3 million. Bond A is secured on the company's head office building; bond B is unsecured. Slush has suffered a severe downturn in demand. Its head office building is worth $1.03 million, but its remaining assets are now worth only $2 million. If the company defaults, what payoff can the holders of bond B expect? Note: Enter your answer in dollars, not in millions. Round your answer to the nearest whole dollar amount. Payoff of bond B
9. Problem 3-10 (Times-Interest-Earned Ratio) E eBook Times-Interest-Earned Ratio The Morrit Corporation has $570,000 of debt outstanding, and it pays an interest rate of 10% annually. Morrit's annual sales are $3 million, its average tax rate is 25%, and its net profit margin on sales is 3%. If the company does not maintain a TIE ratio of at least 3 to 1, then its bank will refuse to renew the loan, and bankruptcy will result. What is Morrit's TIE ratio? Do not round intermediate calculations. Round your answer to two decimal places.
The W.C. Pruett Corp. has $800,000 of interest-bearing debt outstanding, and it pays an annual interest rate of 12%. In addition, it has $700,000 of common equity on its balance sheet. It finances with only debt and common equity, so it has no preferred stock. Its annual sales are $4.8 million, its average tax rate is 25%, and its profit margin is 2%. What are its TIE ratio and its return on invested capital (ROIC)? Round your answers to two decimal places. TIE: ROIC: X %