XYZ company requires a short term loan of $100,000 to finance its working capital requirements....
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Finance
XYZ company requires a short term loan of $100,000 to finance its working capital requirements. Two banks are considering the loan request but each bank requires certain minimum conditions be satisfied. Bank America requires a times interest earned of at least 4 and Bank Boston requires a NOPAT return on assets of at least 40%.
The following information relates to XYZ Company for the year ended Dec 31, 2017:
Sales $360,000
COGS 30% of sales
Other expenses $10,000
Operating profit margin 40%
Interest expense $24,000
Operating profit margin 26%
The operating profit for XYZ will be
a. 93,600
b. 120,000
c. 144,000
d. 252,000
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