​Scenario: Pettijohn Inc -Refer to Scenario: Pettijohn Inc

question 11

Multiple Choice

​Scenario: Pettijohn Inc.The balance sheet and income statement shown below are for Pettijohn Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over.​​ $\begin{array}{lr}\text { Income Statement (Millions of } \$ \text { ) } & 2007 \\\text { Net sales } & \$ 58,800.00 \\\text { Operating costs except depr'n } & \$ 54,978.0 \\\text { Depreciation } & \$ 1,029.0 \\\text { Earnings before interest and taxes (EBIT) } & \$ 2,793.0 \\\text { Less interest } & 1,050.0 \\\text { Earnings before taxes (EBT) } & \$ 1,743.0 \\\text { Taxes } & \$ 610.1 \\\text { Net income } & \$ 1,133.0 \\\text { Other data: } & \\\text { Shares outstanding (millions) } & 175.00 \\\text { Common dividends } & \$ 509.83 \\\text { Interest rate on notes payable \& L-T bonds } & 6.25 \% \\\text { Federal plus state income tax rate } & 35 \% \\\text { Year-end stock price } & \$ 77.69\end{array}$
-Refer to Scenario: Pettijohn Inc.What is the firm's EBITDA coverage?

• A)3.29
• B)3.46
• C)3.64
• D)3.82

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Definitions:

Alternative Hypotheses

In statistical hypothesis testing, it is the hypothesis that proposes a difference or effect, in contrast to the null hypothesis which proposes no effect or relationship.

Type II Error

Refers to the error that occurs when a statistical test fails to reject a false null hypothesis.

Type I Error

Falsely rejecting a true null hypothesis, widely recognized as a "false positive."

Control Limits

The bounds used in control charts to signal when a process is in or out of control, based upon the statistical properties of the monitored process.