Ask Question
BusinessBusiness
26 November, 18:45

MPI Incorporated has $9 billion in assets, and its tax rate is 25%. Its basic earning power (BEP) ratio is 11%, and its return on assets (ROA) is 7%. What is MPI's times-interest-earned (TIE) ratio

+3
Answers (1)
  1. 26 November, 19:12
    0
    TIE = 6.6 times

    Explanation:

    Total Assets = $9 billion = $9,000,000,000

    Basic Earning Power Ratio (BEP) = 11%

    Return on Assets = 7%

    tax rate 25%

    Calculate Earning before interest and Tax using formula of BEP

    BEP = Earning before interest and Tax / Total Assets

    11% = Earning before interest and Tax / $9,000,000,000

    Earning before interest and Tax = $9,000,000,000 x 11%

    Earning before interest and Tax = $990,000,000

    Calculate Net Income by using following formula

    Return on Assets = Net income / Total Assets

    7% = Net Income / $9,000,000,000

    Net Income = $9,000,000,000 x 7% = $630,000,000

    Net Income after interest and before tax = $630,000,000 x (100/75) = $840,000,000

    Interest Expense = $990,000,000 - 840,000,000 = $150,000,000

    Times Interest Earned Ratio = Earning before interest and Tax / Interest expenses

    Times Interest Earned Ratio = 990,000,000 / 150,000,000

    TIE = 6.6 times
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “MPI Incorporated has $9 billion in assets, and its tax rate is 25%. Its basic earning power (BEP) ratio is 11%, and its return on assets ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
In order to vote in Texas, you must meet which of the following requirements? A. be a resident of Texas, a U. S. citizen, and at least 18 years of age B. be a resident of Texas, a U. S. citizen, and at least 21 years of age C.
Answers (1)
Firm L has debt with a market value of $200,000 and a yield of 9%. The firm's equity has a market value of $300,000, its earnings are growing at a rate of 5%, and its tax rate is 40%. A similar firm with no debt has a cost of equity of 12%.
Answers (1)
What is the difference between folkways and mores? A. Folkways are norms that are seen as central to the functioning of a society, whereas mores are the routine conventions of everyday life. B.
Answers (1)
A company plans to amortize an intangible asset. when they journalize the amortization amount, they should debit an expense account and credit
Answers (1)
A subsidiary ledger: (A) used in place of the general ledger if the general ledger is destroyed or stolen. (B) a group of accounts used by branches and subsidiaries of a corporate business.
Answers (1)
New Questions in Business
Shared values among employees are the glue of successful management a. True b. False
Answers (1)
At 4 percent inflation, how much time will it take for prices to double? A. six years B. nine years C. twelve years D. eighteen years
Answers (1)
A friend comes up to you and offers you a free ticket to a professional baseball game that night. You decide to attend the game. The game takes five hours and costs you $15 for transportation.
Answers (2)
Cash flows from operating activities for both the indirect and direct methods are presented for Electronic Transformations.
Answers (1)
A subtle form of racial discrimination in housing is "racial steering." racial steering occurs when real estate agents show prospective buyers homes only in neighborhoods already dominated by that family's race.
Answers (1)
Home » Business » MPI Incorporated has $9 billion in assets, and its tax rate is 25%. Its basic earning power (BEP) ratio is 11%, and its return on assets (ROA) is 7%. What is MPI's times-interest-earned (TIE) ratio
Sign Up Forgot Password?