chandsingh

The problem says… is the TIE Ratio falls below 2.0 the company will violate its covenants.
You forecast interest charges of 25 million. you estimate of EBITDA runs from [40  60] million.
1) if the outcomes for ebitda are equally likely, what is the probability that EBITDA/interest will fall below 2.0, breaching the covenant.
So………
I calculated my TIE range 40/25 = 1.6 60/25 =2.4
What is confusing me is 2.4 to 1.6 is this the total space???
and why is the probability of falling below 2.0 defined as [2.0 to 1.6]
the right answer is:
2.0 1.6/ 2.41.6 = .5 i just dont get why there is a 1.6 in the numerator….. is this just a rule of uniform random variables?