ABCO Glazing has $1.5MM in debt with owners' equity of $6MM. It pays 6% interest on its borrowing. It has $5MM in equipment which depreciates 5% annually. Suppose that during the year the company's total costs (operating and financing) exactly equal its revenue of $4.5MM. What is the firm's coverage ratio?

a) 0
b) 1
c) 3.78
d) 50
e) Cannot be answered without additional information

Ans: c) 3.78

Business

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