n investor is considering a $10,000 investment in a start-up company. She estimates that she has probability 0.39 of a $23,000 l
1 answer:
Answer:
The expected profit is -$13,162.
I would not recomend the investor to make this investment.
Explanation:
The expected profit can be calculated multypling the probabilities of every outcome and the profit of each outcome, and substracting the total invevstment.
The outcomes are:
1) probability 0.39 of a $23,000 loss,
2) probability 0.24 of a $8700 profit,
3) probability 0.12 of a $31,000 profit, and
4) probability 0.25 of breaking even
NOTE: It is assumed that the outcomes does not include the initial investment.
Then, the expected profit of this investment is:
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Answer:
times interest ratio = EBIT / interest expense
1)
Kringle: TIE ratio = ($40,870 - $10,300 - $350) / $350 = 86.34
Leihman: TIE ratio = ($46,320 - $12,080 - $2,000) / $2,000 = 16.12
2)
Kringle was better able to cover its interest expenses since its TIE ratio is much higher than Leihman's (more than 5 times higher). This means that it is much easier for Kringle to pay off the interests on its debt.
