You have recently acquired a family business that has no debt. You are interested in borrowing funds for other prospective acquisitions. You learn that to be able to keep your company at a level of "investment grade" and to be able to borrow at 6.5%, your operating cash flow coverage must be at least three times debt service. You forecast operating cash flow at $25 million. What is your debt capacity?© BrainMass Inc. brainmass.com June 3, 2020, 11:59 pm ad1c9bdddf
Operating cash flow coverage = Operating cash flow/Interest = 3 (this is what is to be maintained)
Maximum interest ...
The solution explains how to determine the debt capacity