Calculate Squamish's Times Interest Earned Ratio for Next Year Assuming

question 18

Multiple Choice

Calculate Squamish's times interest earned ratio for next year assuming the firm raises $40 million of new debt at an interest rate of 7 percent.

• A) 2.00
• B) 3.09
• C) 3.66
• D) 4.35
• E) None of the above. EBIT = [40/(1 - 0.36)] + 15 = $77.5. Interest = $15 + 0.07(40) = $17.8. Times interest earned = 77.5/17.8 = 4.35 times.

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