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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%.
How does your analysis change? Which project do you pick and calculate the payback period of each project. Compute the IRR of each project. Which project do you pick, and why?
the current price of a stock is 33 and the annual risk-free rate is 6. a call options with a strike price of 32 and
computation of profit margin of college at given strength of students.houghton college is planning to begin a new
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This cost of capital was computed based upon the current after-tax cost of equity and debt funds in the bank's capital structure.
What valuation do these assumptions suggest - analysis so far implicitly assumes that the investors are holding straight equity. Under the term sheet proposed by Vulture Ventures, is this a valid assumption?
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today many companies face budgetary challenges on a continual basis. two critical aspects that businesses lack are
Common Stock of Coquihalla Company will pay a dividend of dollar 8.00 in the upcoming year, & dividends are expected to grow 5 percent per year in the future.
How large of a sales increase can the company achieve without having to raise funds externally? Write out your answer completely.
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