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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
In 2010, Natural Selection, a nationwide computer dating service, had $500 million of assets and $200 million of liabilities. Earnings before interest and taxes were $120 million, interest expense was $28 million, the tax rate was 40 percent, principal repayment requirements were $24 million, and annual dividends were 30 cents per share on 20 million shares outstanding.
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a. Calculate:
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i. Natural Selection’s liabilities-to-equity ratio
Â
ii. Times interest earned ratio
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iii. Times burden covered
Â
b. What percentage decline in earnings before interest and taxes could Natural Selection have sustained before failing to cover:
Â
i. Interest payment requirements?
Â
ii. Principal and interest requirements?
iii. Principal, interest, and common dividend payments?
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