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Pop Evil Inc.’s net income for the most recent year was $16,481. The tax rate was 21 percent. The firm paid $3,681 in total interest expense and deducted $4,385 in depreciation expense. What was the cash coverage ratio for the year? (

Respuesta :

Answer:

7.86

Explanation:

Given,

Net income = $16,481

Tax rate = 21 %

interest expense =  $3,681

Depreciation expense = $4,385

Cash Coverage ratio =[tex]\dfrac{EBIT+ Non-cash Expense}{interest expense}[/tex]

EBIT = Expense before tax

Cash Coverage ratio =[tex]\dfrac{\dfrac{16,481}{1-0.21}+ 4385+3681}{3681}[/tex]

Cash Coverage ratio =[tex]\dfrac{28928.025}{3681}[/tex]

Cash Coverage ratio =7.86

Hence, the cash coverage ratio is equal to 7.86.

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