Problem:
A medium size firm is considering the issuance of additional long-term debt to finance expansion. At the present time the company has $160 million of 10% bonds outstanding. Its after-tax net income is $48 million, and the company's (marginal) income tax rate is 40%. The company is required by the bond holders to maintain its times interest earned ratio at 4.0 or greater.
Required:
Question: Determine the firm's current times interest earned ratio.
Note: Please provide reasons to support your answer.