Depending on the demand for your product, your sales are expected as follows: Demand Prob. Sales Low 0.2 41 Medium 0.7 53 High 0.1 70 EBIT is expected to be 23% of sales and the average tax rate is 34. There is no debt, the market value of equity is 430 and there are 40 shares outstanding. The company is thinking of borrowing $250 at an interest rate of 6% to repurchase its shares at the current market value. Part 1 What is the standard deviation of ROIC before the recapitalization? 5+ decimals
Depending on the demand for your product, your sales are expected as follows: Demand Prob. Sales Low 0.2 41 Medium 0.7 53 High 0.1 70 EBIT is expected to be 23% of sales and the average tax rate is 34. There is no debt, the market value of equity is 430 and there are 40 shares outstanding. The company is thinking of borrowing $250 at an interest rate of 6% to repurchase its shares at the current market value. Part 1 What is the standard deviation of ROIC before the recapitalization? 5+ decimals
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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
Transcribed Image Text:Problem 31
Intro
Depending on the demand for your product, your sales are expected as follows:
Demand Prob. Sales
Low
0.2
41
Medium
0.7
53
High
0.1
70
EBIT is expected to be 23% of sales and the average tax rate is 34. There is no
debt, the market value of equity is 430 and there are 40 shares outstanding.
The company is thinking of borrowing $250 at an interest rate of 6% to
repurchase its shares at the current market value.
Part 1
What is the standard deviation of ROIC before the recapitalization?
5+ decimals
Submit

Transcribed Image Text:Part 2
What is the standard deviation of EPS before the recapitalization?
4+ decimals
Submit
Part 3
What is the standard deviation of EPS after the recapitalization?
3+ decimals
Submit
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