New Firm Is Developing Its Business Plan It Will Require

question 53

Multiple Choice

new firm is developing its business plan It will require $565,000 of assets, and it projects $452,800 of sales and $354,300 of operating costs for the first year Management is quite sure of these numbers because of contracts with its customers and suppliers It can borrow at a rate of 7.5%, but the bank requires it to have a TIE of at least 4.0, and if the TIE falls below this level the bank will call in the loan and the firm will go bankrupt What is the maximum debt ratio the firm can use? (Hint: Find the maximum dollars of interest, then the debt that produces that interest, and then the related debt ratio.)

• A) 47.33%
• B) 49.82%
• C) 52.45%
• D) 55.21%
• E) 58.11%

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Definitions:

Global Warming

The long-term increase in Earth's average surface temperature due to human activities, especially the emission of greenhouse gases, leading to significant climatic and environmental changes.

Carbon Dioxide

A colorless, odorless gas produced by burning carbon and organic compounds and by respiration. It is naturally present in the air and is absorbed by plants in photosynthesis.

Future Generations

Refers to the people who will live in the future, highlighting the importance of considering the long-term impacts of decisions made today.

Pollution Charges

Fees imposed on entities that pollute, acting as a financial disincentive for environmental pollution.