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XYZ company requires a short term loan of $100,000 to finance its working capital requirements....

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Finance

XYZ company requires a short term loan of $100,000 to finance its working capital requirements. Two banks are considering the loan request but each bank requires certain minimum conditions be satisfied. Bank America requires a times interest earned of at least 4 and Bank Boston requires a NOPAT return on assets of at least 40%.

The following information relates to XYZ Company for the year ended Dec 31, 2017:

Sales $360,000

COGS 30% of sales

Other expenses $10,000

Operating profit margin 40%

Interest expense $24,000

Operating profit margin 26%

The operating profit for XYZ will be

a. 93,600

b. 120,000

c. 144,000

d. 252,000

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