Intermediate Financial Management
14th Edition
ISBN: 9780357516782
Author: Brigham, Eugene F., Daves, Phillip R.
Publisher: Cengage Learning
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9) The Morrit Corporation has $450,000 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 5%. 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.
10) What is the future value of a 6%, 5-year ordinary annuity that pays $350 each year? Do not round intermediate calculations. Round your answer to the nearest cent.
$
If this were an annuity due, what would its future value be? Do not round intermediate calculations. Round your answer to the nearest cent.
$
The Morrit Corporation has $900,000 of debt outstanding, and it pays an interest rate of 10% annually. Morrit's annual sales are $6 million, its average tax rate is 25%, and its net profit margin on sales is 5%. 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 Tarpon Corp has $325,000 of debt outstanding, and it pays an interest rate of 7% annually. Its
annual sales are $900,000, its average tax rate is 25%, and its net profit margin on sales is 10 %. If
the company does not maintain a times interest earned (TIE) ratio of greater than 5 to 1, then its
bank will refuse to renew the loan and bankruptcy will result. Holding sales constant, at what
operating (EBIT) margin would the bank refuse to renew the loan?
O 14.06%
O 16.25%
O 15.17%
O 17.50%
Chapter 7 Solutions
Intermediate Financial Management
Ch. 7 - Financial ratio analysis is conducted by managers,...Ch. 7 - Prob. 3QCh. 7 - Profit margins and turnover ratios vary from one...Ch. 7 - How might (a) seasonal factors and (b) different...Ch. 7 - Why is it sometimes misleading to compare a...Ch. 7 - Greene Sisters has a DSO of 20 days. The companys...Ch. 7 - Vigo Vacations has $200 million in total assets,...Ch. 7 - Winston Watch’s stock price is $75 per share....Ch. 7 - Reno Revolvere has an EPS of $1.50, a cash flow...Ch. 7 - Needham Pharmaceuticals has a profit margin of 3%...
Ch. 7 - Prob. 6PCh. 7 - Ace Industries has current assets equal to 3...Ch. 7 - Prob. 10PCh. 7 - Prob. 11PCh. 7 - The Kretovich Company had a quick ratio of 1.4, a...Ch. 7 - Data for Lozano Chip Company and its industry...Ch. 7 - Why are ratios useful? What three groups use ratio...Ch. 7 - Prob. 9MCCh. 7 - What are some qualitative factors that analysts...
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- Times-Interest-Earned Ratio The Morrit Corporation has $570,000 of debt outstanding, and it pays an interest rate of 8% 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 5 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.arrow_forwardhe Morrit Corporation has $600,000 of debt outstanding, and it pays an interest rate of 8% 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 5 to 1, then its bank will refuse to renew the loan, and bankruptcy will result. What is Morrit’s TIE ratio?arrow_forwardAlumbat Corporation has $800,000 of debt outstanding, and it pays an interest rate of 10 percentannually on its bank loan. Alumbat’s annual sales are $3,200,000, its average tax rate is 40 percent,and its net profit margin on sales is 6 percent. If the company does not maintain a TIE ratio of at least 4times, its bank will refuse to renew its loan, and bankruptcy will result. What is Alumbat’s current TIEratio?arrow_forward
- Alum Co. has $800,000 of debt outstanding, and it pays an interest rate of 10% annually on its bank loan. Alum’s annual sales are $3,200,000, its average tax rate is 40%, and its net profit margin on sales is 6%. If the company does not maintain a times interest earned ratio of at least 4 times, its bank will refuse to renew its loan, and bankruptcy will result. What is Alum Co.’s current times interest earned ratio?arrow_forwardThe Morrit Corporation has $600,000 of debt outstanding, and it paysan interest rate of 8% annually. Morrit’s annual sales are $3 million, itsaverage tax rate is 40%, and its net profit margin on sales is 3%. If thecompany does not maintain a TIE ratio of at least 5 to 1, then its bankwill refuse to renew the loan, and bankruptcy will result. What is Morrit’sTIE ratio?arrow_forwardAlumbat Corporation has $800,000 of debt outstanding, and it pays an interest rate of 10 percent annually on its bank loan. Alumbat's annual sales are $3,200,000, its average tax rate is 40 percent, and its net profit margin on sales is 6 percent. If the company does not maintain a TIE ratio of at least 4 times, its bank will refuse to renew its loan, and bankruptcy will result. What is Alumbat's current TIE ratio? Ctrl)-arrow_forward
- National Corporation has P850,000 of debt outstanding, and it pays an interest rate of 10 percent annually on its bank loan. National’s annual sales are P3,200,000, its average tax rate is 40 percent, and its net profit margin on sales (Net income after tax) is 6 percent. If the company does not maintain a Times Interest Earned ratio of at least 4 times, its bank will refuse to renew its loan, and bankruptcy will result. What is National’s current Times Interest Earned ratio?arrow_forwardByrd Enterprises has no debt. Its current total value is $50.2 million. Assume debt proceeds are used to repurchase equity. Ignoring taxes, what will the company’s value be if it sells $20 million in debt? Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567. Suppose now that the company’s tax rate is 21 percent. What will its overall value be if it sells $20 million in debt? Note: Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.arrow_forwardBird Enterprises has no debt. Its current total value is $50.8 million. Assume debt proceeds are used to repurchase equity. a. Ignoring taxes, what will the company's value be if it sells $20.3 million in debt? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, round your answer to the nearest whole number, e.g., 1,234,567.) b. Suppose now that the company's tax rate is 24 percent. What will its overall value be if it sells $20.3 million in debt? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) a. Value of the firm b. Value of the firmarrow_forward
- 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?arrow_forwardBird Enterprises has no debt. Its current total value is $48.4 million. Assume the company sells $19.1 million in debt. a. Ignoring taxes, what is the debt-equity ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Assume the company’s tax rate is 22 percent. What is the debt-equity ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)arrow_forwardByrd Enterprises has no debt. Its current total value is $47.2 million. Assume the company sells $18.5 million in debt. Ignoring taxes, what is the debt-equity ratio? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Assume the company’s tax rate is 21 percent. What is the debt-equity ratio? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.arrow_forward
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