(Coverage ratios) EndRun Corp., has $100 million of earnings before interest and taxes and $40 million of interest expense.
a. Calculate the firm’s interest coverage ratio.
1.85
2.00
2.1
2.16
2.25
2.34
2.40
2.45
2.50
b. Calculate the pro forma interest coverage ratio assuming the issuance of $100 mil- lion of 10% debt with the issue proceeds to be invested fully in a plant under con- struction.
1.85
2.00
2.1
2.16
2.25
2.34
2.40
2.45
2.50
c. Calculate the pro forma interest coverage ratio assuming the issuance of $100 million of 10% debt with the proceeds to be invested temporarily in commercial paper that yields 8%.
1.85
2.00
2.1
2.16
2.25
2.34
2.40
2.45
2.50