Next year's expected net income after tax, but before new financing -------- $80 Million
Sinking-fund payments due next year on existing debt ---------------------------$23 Million
Interest due next year on existing debt------------------------------------------------$14 Million
Company Tax Rate--------------------------------------------------------------------------35%
Common Stock Price-----------------------------------------------------------------------$32
Common Shares outstanding------------------------------------------------------------30 Million
1. Calculate the times interest earned ratio for next year assuming the firm raises $40 million of new debt at an interest rate of %6
2. Calculate the times burden covered ratio for next year assuming annual sinking fund payments on the new debt will equal $10 million.