As CFO of Nile Holdings, a carpet wholesaler, you have the following information as of December 2011:

-Assume Nile raises $100 million of new debt at the end of 2011,at an interest rate of 7%.
a.Assuming Nile must make a $20 million payment on the new debt next year,calculate the firm's times burden covered ratio and times common covered (including debt payments)ratio.
b.As Nile's banker,would you be comfortable loaning the company this new debt?
Briefly explain why,or for what reasons you'd be comfortable or uncomfortable.

Question

As CFO of Nile Holdings, a carpet wholesaler, you have the following information as of December 2011:
 
-Assume Nile raises $100 million of new debt at the end of 2011,at an interest rate of 7%.
a.Assuming Nile must make a $20 million payment on the new debt next year,calculate the firm's times burden covered ratio and times common covered (including debt payments)ratio.
b.As Nile's banker,would you be comfortable loaning the company this new debt?
 Briefly explain why,or for what reasons you'd be comfortable or uncomfortable.

Quizplus · Accepted Answer

The Answer of As CFO of Nile Holdings, a carpet wholesaler, you have the following information as of December 2011:
 
-Assume Nile raises $100 million of new debt at the end of 2011,at an interest rate of 7%.
a.Assuming Nile must make a $20 million payment on the new debt next year,calculate the firm's times burden covered ratio and times common covered (including debt payments)ratio.
b.As Nile's banker,would you be comfortable loaning the company this new debt?
 Briefly explain why,or for what reasons you'd be comfortable or uncomfortable.

As CFO of Nile Holdings, a Carpet Wholesaler, You Have