The Neal Company wants to estimate next year's return on equity (ROE) under different financial...
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The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ratios. Nears total capital is $16 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: $5 million with a 0.2 probability, 2 million with a 0.5 probability, and $0.8 million 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 ratlo is ROE 16 CV - Debt/Capital ratio is 10%, Interest rate is 9% RE O- CV- Debt/Capital ratio is 50%, interest rate is 11% ROE - CV- Debt/Capital ratio is 60%, interest rate is 14% ROE O CV
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