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Find the growth rate

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Reference no: EM133080374

You are evaluating a farm with a return on assets of 10%, a debt-to-equity ratio of 1, interest rate on debt of 5%, a tax rate of 20%, and consumption of 50%.

a. Find the growth rate. = 2.5% (already found it)

b. Now assume that the return on assets of 10% is the expected return and the standard deviation of r is .06. Find the growth rate and standard deviation of growth.

c. Now assume that you also have a variable rate loan and the 5% interest rate is only the expected rate. Interest also has a standard deviation of .03. Find the growth rate and standard deviation of growth.

Reference no: EM133080374

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