A firm is considering issuing additional long-term debt tofinance an expansion.

A firm is considering issuing additional long-term debt tofinance an expansion. The company currently has $20 million in 5%debt outstanding. Its earnings after-tax (or net income NI) is$3.0 million and its marginal and average tax rate is 40 percent.The company is required by the debt holders to maintain its timesinterest earned ratio at 3.0 or greater. How much additional 10percent debt can the company issue now and maintain its timesinterest earned ratio at 3.0? Assume for this calculation thatearnings before interest and taxes remains at its presentlevel.