1. Delectable Parsnip, Inc.’s, net income for the most recent year was $9,812. T
ID: 2820519 • Letter: 1
Question
1. Delectable Parsnip, Inc.’s, net income for the most recent year was $9,812. The tax rate was 35 percent. The firm paid $3,762 in total interest expense and deducted $5,323 in depreciation expense.
What was the company’s cash coverage ratio for the year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Cash coverage ratio times
2. For each of the following, compute the future value: (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
3. For each of the following, compute the present value: (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
4. Solve for the unknown interest rate in each of the following: (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Present Value Years Interest Rate Future Value $ 2,450 10 13 % $ 9,853 23 8 103,305 17 6 241,382 33 43. For each of the following, compute the present value: (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Present Value Years Interest Rate Future Value $ 10 6 % $ 17,928 2 11 42,117 14 14 796,382 19 13 653,8164. Solve for the unknown interest rate in each of the following: (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Present Value Years Interest Rate Future Value $ 745 4 % $ 1,441 935 5 1,778 18,000 16 144,832 73,300 19 318,815Explanation / Answer
Requirement - (1)
Cash Coverage Ratio = [EBIT + Depreciation Expenses] / Interest Expenses
Step-1, Calculation of EBIT
Earnings Before Interest & Tax [EBIT] = Earnings Before Tax + Interest Expenses
= [$9,812 / 0.65] + 3,762
= $ 18,857.38
Step-2, Calculation of Cash Coverage Ratio
Cash Coverage Ratio = [EBIT + Depreciation Expenses] / Interest Expenses
= [$18,857.38 + 5,323] / $3,762
= $ 24,180.38 / 3,762
= 6.43 Times
“Hence, Cash Coverage Ratio = 6.43 Times”
Requirement – (2) Future Value
The Future Value = Present Value x (1 + r) n
Present Value
Years
Interest Rate
Future Value
$2,450
10
13%
$8,316.69
$9,853
23
8%
$57,851.53
$103,305
17
6%
$2,78,176.89
$241,382
33
4%
$8,80,653.53
Requirement – (3) Present Value
The Present Value = Future Value / (1 + r) n
Present Value
Years
Interest Rate
Future Value
$10,010.90
10
6%
$17,928
$34,183.10
2
11%
$42,117
$1,27,190.16
14
14%
$796,382
$64,115.81
19
13%
$653,816
Requirement – (4) Interest Rate
Present Value
Years
Interest Rate
Future Value
$745
4
17.95%
$1,441
$935
5
13.72%
$1,778
$18,000
16
13.92%
$144,832
$73,300
19
8.04%
$318,615
Present Value
Years
Interest Rate
Future Value
$2,450
10
13%
$8,316.69
$9,853
23
8%
$57,851.53
$103,305
17
6%
$2,78,176.89
$241,382
33
4%
$8,80,653.53
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