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    Times-Interest-Earned Ratio

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    4-8 Times-Interest-Earned Ratio
    The H.R Pickett Corporation has $5000,000 of debt outstanding and it pays an interest rate of 10 percent annually; Pickett's annual sales are $2 million, its average tax rate is 30 percent, and its net profit margin on sales is 5 percent. If the company does not maintain a TIE ratio of at least 5 times, its bank will refuse to renew the loan, and bankruptcy will result. Whats Picketts TIE ratio?
    TIE= 3.86X

    Just looking for a formula and steps to produce the above answer

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    Solution Preview

    Please see the response to your posting as below:

    Please check the figure of Pickett's annual sales. It must be$20 million.

    Net profit margin =5% 0f sales ...

    Solution Summary

    Solutions shows calculation of Times-Interest-Earned Ratio of H.R Pickett Corporation.