Morris Corporation

The Morris Corporation has $1,000,000 of debt outstanding, and it pays an interest rate of 9% annually. Morris’s annual sales are $5 million, its average tax rate is 30%, and its net profit margin on sales is 3%. If the company does not maintain a TIE ratio of at least 4 to 1, its bank will refuse to renew the loan and bankruptcy will result. What is Morris’s TIE ratio? Round intermediate calculations to two decimal places