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Problem 6-7 As the chief financial officer of Adirondack Designs, you have the...

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Accounting

Problem 6-7
As the chief financial officer of Adirondack Designs, you have the following information:Sinking-fund payments due next year on the existing debt $ 11 million
Interest due next year on the existing debt $ 6 million
Common stock price, per share $ 26.0
Common shares outstanding 16 million
Company tax rate 40%a. Calculate Adirondack's times-interest-earned ratio for next year assuming the firm raises $46 million of new debt at an interest rate
of 3 percent.
b. Calculate Adirondack's times-burden-covered ratio for next year assuming annual sinking-fund payments on the new debt will equal
$2.5 million.
c. Calculate next year's earnings per share assuming Adirondack raises the $46 million of new debt.
d. Calculate next year's times-interest-earned ratio, times-burden-covered ratio, and earnings per share if Adirondack sells 1.1 million
new shares at $21 a share instead of raising new debt.
Note: Do not round intermediate calculations. Round "Earnings per share" answers to 2 decimal places and other answers to 1
decimal place.
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