The Karson Transport Company currently has net operating income of $491,000 and pays interest expense of $198,000. The c
Posted: Tue Jan 18, 2022 12:59 pm
The Karson Transport Company currently has net operating income
of $491,000 and pays interest expense of $198,000. The company
plans to borrow $1.08 million on which the firm will pay 9 percent
interest. The borrowed money will be used to finance an investment
that is expected to increase the firm's net operating income
by $410,000 a year.
a. What is Karson's times interest earned ratio before the
loan is taken out and the investment is made?
b. What effect will the loan and the investment have on
the firm's times interest earned ratio?
of $491,000 and pays interest expense of $198,000. The company
plans to borrow $1.08 million on which the firm will pay 9 percent
interest. The borrowed money will be used to finance an investment
that is expected to increase the firm's net operating income
by $410,000 a year.
a. What is Karson's times interest earned ratio before the
loan is taken out and the investment is made?
b. What effect will the loan and the investment have on
the firm's times interest earned ratio?