WHA ome File Edit View History Bookmarks People Window Help ?? 38%,-, Sat 9:17PM
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WHA ome File Edit View History Bookmarks People Window Help ?? 38%,-, Sat 9:17PM Grant Rest ? wdTap . Cerchn Learning xe? Mestap . Cengage Learing x Y D Cingage Leaning M Fin331 Busness Finance is. x Securehttpsing.cengage.com/staticinbui/ index.htmbld-8245908nbNodeld 3175170358e(S8N-97813056359758parentd 317517127 Blackboard Learn M Gma" Appie iCloud ?Cengage FIN 331 nFacebook y Twitter?Yahool ?News ?Papua, Osna Chiu-. Add / Dep Corse NDTAP Grant Restmeyer r 4 Homework, part 2 -graded moow at 1 AM CO Activity Information Check My Work O Click here to read the eBook: Profitability Rati ? TIO CALCULATIONS Thomson Trucking has S10baer, r, assets, and its tax rate is 3S%. Itsbase eaming power Ceerato is i interest-earned (T3E) ratio? Round your answer to two decimal places 4%, and its return on ant OOA)isys. what·tstre. Chek My Work 2 3Explanation / Answer
Step 1: Calculate EBIT
The value of EBIT can be arrived with the use of following formula for BEP:
BEP = EBIT/Total Assets
Substituting values in the above formula, we get,
14% = EBIT/10,000,000,000
Rearranging values, we get,
EBIT = 14%*10,000,000,000 = 1,400,000,000
_____
Step 2: Calculate Net Income
The value of net income can be derived with the use of following formula for ROA:
ROA = Net Income/Total Assets
Substituting values in the above formula, we get,
3% = Net Income/10,000,000,000
Rearranging Values, we get,
Net Income = 3%*10,000,000,000 = $300,000,000
_____
Step 3: Calculate EBT and Interest Expense Amount
The value of EBT and interest expense amount is determined as below:
EBT = Net Income/(1-Tax Rate)
Substituting values in the above formula, we get,
EBT = 300,000,000/(1-35%) = $461,538,461.53
Now, we can determine expense as follows:
Interest Expense = EBIT - EBT = 1,400,000,000 - 461,538,461.53 = $938,461,538.46
_____
Step 4: Calculate Times-Interest-Earned-Ratio
The value of times interest-earned-ratio is calculated as below:
Times-Interest-Earned-Ratio = EBIT/Interest Expense = 1,400,000,000/938,461,538.46 = 1.49x (answer)
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