Question

MPI Incorporated has $8 billion in assets, and its tax rate 35%. Its basic earning power (BEP) ratio is 8% and its return on assets (ROA) is 5%. What is MPI's times-interest-earned (TIE) ratio? Round your answer to two decimal places.

Answer #1

Return on assets = Net Income / Total assets

5% = Net Income/ 8 billion

Net Income = $8 billion * 5% = 400,000,000

Basic Earning Power = EBIT / Total Assets

8% = EBIT / $8 billion

EBIT = $640,000,000

EBT = Net Income / 1 - Tax rate = $400,000,000 / 1- 0.35 = $615,384,615.4

Interest portion = EBIT - EBT = $640,000,000 - $615,384,615.4 = 24,615,285

Times interest earned ratio = EBIT / Interest = $640,000,000/ 24,615,285 = 26 times

Any doubt please comment.

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MPI Incorporated has $5 billion in assets, and its tax rate is
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assets (ROA) is 5%. What is MPI's times-interest-earned (TIE)
ratio? Round your answer to two decimal places.

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MPI Incorporated has $9 billion in assets, and its tax rate is
25%. Its basic earning power (BEP) ratio is 12%, and its return on
assets (ROA) is 6%. What is MPI's times-interest-earned (TIE)
ratio? Do not round intermediate calculations. Round your answer to
two decimal places.

MPI Incorporated has $9 billion in assets, and its tax rate is
25%. Its basic earning power (BEP) ratio is 13%, and its return on
assets (ROA) is 3%. What is MPI's times-interest-earned (TIE)
ratio? Do not round intermediate calculations. Round your answer to
two decimal places.

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Excel Online file below. Open the spreadsheet and perform the
required analysis to answer the question below.
Open spreadsheet
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What is MPI's times-interest-earned (TIE) ratio? Round your
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eBook Problem Walk-Through
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25%. Its basic earning power (BEP) ratio is 9%, and its return on
assets (ROA) is 5%. What is MPI's times-interest-earned (TIE)
ratio? Do not round intermediate calculations. Round your answer to
two decimal places.
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