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The Neal Company wants to estimate next year's return on equity (ROE) under different leverage ratios. Neal's total capital is $13 million, it currently uses only common equity, it has no future plans to use preferred stock in its capital structure, and its federal-plus-state tax rate is 40%. The CFO has estimated next year's EBIT for three possible states of the world: $4 million with a 0.2 probability, $1.8 million with a 0.5 probability, and $600,000 with a 0.3 probability. Calculate Neal's expected ROE, standard deviation, and coefficient of variation for each of the following debt-to-capital ratios. Do not round intermediate calculations. Round your answers to two decimal places at the end of the calculations.
Debt/Capital ratio is 0.
RE = ________%
σ = ___________%
CV = ________
Debt/Capital ratio is 10%, interest rate is 9%.
RE = ______%
σ = _______%
CV = _____
Debt/Capital ratio is 50%, interest rate is 11%.
RE = _____%
σ = _____%
CV = ____
Debt/Capital ratio is 60%, interest rate is 14%.
Show the pros and cons of applying different investment decision rules when faced with the choice of investing corporate funds. Provide two examples
Analysis of financial position under Asset utilization method - Please analyze the financial condition of the company; under the following category
The more collateral there is backing a loan, less lender has to worry about adverse selection find is this statement true or false or uncertain. Explain your reasoning.
The following are monthly percentage (%) price changes for 4 market indexes. So calculate the average monthly rate of return for each index and Standard deviation for each index
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Written, Corporation has 300,000 outstanding shares of $2 par common stock and 60,000 shares of no-par 8 percent preferred stock with a stated value of dollar 5.
The Healthy Spring Water corporation sells bottled water for offices or homes. The price of the water is $20 per ten gallon bottle & firm currently sells 2,000 bottles per day.
During its first year of operations, O'Donnell produced 100,000 units and sold 80,000 units. During its second year of operations, it produced 75,000 units and sold 90,000 units. In its third year, O'Donnell produced 80,000 units and sold 75,000 u..
For product or service that your employer provides to market, discuss in detail whether you believe the demand for that product or service is relatively elastic or relatively inelastic.
A share holder has a stock portfolio. Every stock in the portfolio has following market values and betas. So determine the Shareholder expect from this portfolio .
In April 1988, the VP of project finance at the Hilton Company, Christopher Nassetta, was creating recommendations for discount rates that should be used to estimate each of the company's three divisions.
Under the Articles of Association of the Company, the preference shareholders have the right to receive one-third of the surplus remaining after repaying the equity share capital.
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