Times-Interest-Earned Ratio
The Morris Corporation has $400,000 of debt outstanding, and it pays an interest rate of 9% annually. Morris's annual sales are $1.6 million, its average tax rate is 40%, and its net profit margin on sales is 3%. If the company does not maintain a TIE ratio of at least 5 to 1, its bank will refuse to renew the loan and bankruptcy will result. What is Morris's TIE ratio? Do not round intermediate calculations. Round your answer to two decimal places.
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