The W.C. Pruett Corp. has $800,000 of interest-bearing debt outstanding, and it pays an annual interest rate of 7%. In addition, it has $800,000 of common equity on its balance sheet. It financeswith only debt and common equity, so it has no preferred stock. Its annual sales are $2.16 million, its average tax rate is 25%, and its profit margin is 3%. What are its TIE ratio and its return oninvested capital (ROIC)? Round your answers to two decimal places.TIE:ROIC:X%

The objective of the question is to calculate the Times Interest Earned (TIE) ratio and the Return…

Answered: The W.C. Pruett Corp. has $800,000 of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The W.C. Pruett Corp. has $500,000 of interest-bearing debt outstanding, and it pays an annual interest rate of 11%. In addition, it has $800,000 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 $1.95 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.
The W.C. Pruett Corp. has $450,000 of interest-bearing debt outstanding, and it pays an annual interest rate of 11%. 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 $1.62 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)? Round your answers to two decimal places. TIE: × ROIC: %
The W.C. Corp. has $600,000 of interest-bearing debt outstanding, and it pays an annual interest rate of 5%. In addition, it has $500,000 of common stock on its balance sheet. It finances with only debt and common equity, so it has no preferred stock. Its net income after taxes (NIAT) is $135,000, its average tax rate is 40%. What is its time interest earned (TIE) ratio?
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 commonstock 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 35%, and its profitmargin is 7%. What are its TIE ratio and its return on invested capital (ROIC)?
The H.R. Pickett Corp. has $500,000 of debt outstanding, and it pays an annual interest rate of 10%. Its annual sales are $2 million, its average tax rate is 30%, and its net profit margin is 5%. What is its TIE ratio?
Lamont Corp. is debt-free and has a weighted average cost of capital of 12.7 percent. The current market value of the equity is $2.3 million and there are no taxes. According to M&M Proposition I, what will be the value of the company if it changes to a debt-equity ratio of .85?
The Pickett Corporation has $500,000 of debt outstanding, and it pays annual interest rate of 10%. It also has $700,000 of common equity. [Note: We don’t need this information to find TIE]. The company’s Sales is $2 million, its tax rate is 30%, and the profit margin is 5%. Calculate the firm’s TIE ratio.
Bolero Corporation has one long term loan (interest bearing debt) of $700,000 at an interest rate of 8%. The company has accounts payable of $300,000 (non-interest bearing) and equity of $1,000,000. It estimates that its cost of equity is 16%. Its tax rate is 35%. A. What is the company’s weighted average cost of capital on interest bearing debt and equity? B. What is Bolero Corporation’s weighted average cost of capital on all liabilities and equity (or total invested capital)?
Baker Industries’s net income is $24,000, its interest expense is $5,000, andits tax rate is 40%. Its notes payable equals $27,000, long-term debt equals $75,000, and commonequity equals $250,000. The firm finances with only debt and common equity, so it hasno preferred stock. What are the firm’s ROE and ROIC?
Edwards Construction currently has debt outstanding with a market value of $98,000 and a cost of 10 percent. The company has EBIT of $9,800 that is expected to continue in perpetuity. Assume there are no taxes. a-1. What is the value of the company's equity? a-2. What is the debt-to-value ratio? b. What are the equity value and debt-to-value ratio if the company's growth rate is 4 percent? c. What are the equity value and debt-to-value ratio if the company's growth rate is 8 percent?
Williamson, Inc., has a debt-equity ratio of 2.45. The company's weighted average cost of capital is 10 percent, and its pretax cost of debt is 6 percent. The corporate tax rate is 25 percent. a. What is the company's cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the company's unlevered cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. What would the weighted average cost of capital be if the company's debt-equity ratio were 80 and 1.70? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) a. Cost of equity b. Unlevered cost of equity C. WACC at debt-equity ratio of 80 WACC at debt-equity ratio of 1.70 % % % %
Blitz Industries has a debt-equity ratio of 1.7. Its WACC is 8.1 percent, and its cost of debt is 5.7 percent. The corporate tax rate is 23 percent. a. What is the company’s cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the company’s unlevered cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c-1. What would the cost of equity be if the debt-equity ratio were 2? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c-2. What would the cost of equity be if the debt-equity ratio were 1.0? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c-3. What would the cost of equity be if the debt-equity ratio were zero? (Do not round intermediate…

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