Calculate neal expected roe

Reference no: EM13300716

The Neal Company wants to estimate next year's return on equity (ROE) under different leverage ratios. Neal's total assets are $14 million, it currently uses only common equity, and its federal-plus-state tax rate is 40 percent. The CFO has estimated next year's EBIT for 3 possible states of the world: $4.2 million with a .2 probability, $2.8 million with a .5 probability, and $700,000 with a .3 probability. Calculate Neal's expected ROE, standard deviation, and coefficient of variation for each of the following debt ratios, and evaluate the results:

Debt Ratio Interest Rate

0%
10 9%
50 11
60 14

Reference no: EM13300716

Questions Cloud

What is the max price per ton the company should pay : The supplier says it would prefer to sell the company a 65% NaOH solution and the company says the water content is immaterial as long as the equivalent costs are the same including freight.

Explain what fraction of the containers volume is occupied : The volume of a single molecule of water is 2.99 x 10^-23 mL. For a sample of gaseous water at 1.00 atm and 150° C, what fraction of the containers volume is occupied by the molecules themselves

Determine the gravitational force acting between two spheres : Determine the gravitational force acting between two spheres that are touching each other. The mass of each sphere is 400 kg and the radius is 300mm.

Explain calculate the ph of strong acid solutions : Calculate the pH of each of the following strong acid solutions. (a) 0.000625 M HIO4 pH = (b) 0.869 g of HBrO4 in 22.0 L of solution pH = (c) 50.0 mL of 8.10 M H2SO4 diluted to 3.50 L pH = (d) a mixture formed by adding 75.0 mL of 0.00187 M HIO4 t..

Calculate neal expected roe : Calculate Neal's expected ROE, standard deviation, and coefficient of variation for each of the following debt ratios, and evaluate the results.

Find the volume percentage of ethylene glycol in solution : An antifreeze solution is made by mixing ethylene glycol (?= 1116 kg/m3) with water. determine the volume percentage of ethylene glycol in the solution

Explain the equivalence point ve pfe2 : Calculate pFe2 at each of the following points in the titration of 25.00 mL of 0.02138 M Fe2 by 0.03645 M EDTA at a 7.00 pH: a) 11.00 ml pFe2+ =? b) the equivalence point Ve pFe2+=? c) 20.00 ml pFe2+=

Compare and contrast weaknesses of approach & opportunities : Compare and contrast the Weaknesses of each approach & Opportunities of each approach?

What does amount reported for cost of goods sold represent : What does the amount reported for cost of goods sold represent? Is your company a profitable company? How can you tell? Does your company use accrual-based or cash-based accounting?

User Account

All Pages