7.3. For Wotsafs estimates: g = 30%, = (65% + 5%)/6 = 11.67% the EBIT coverage...

7.3. For Wotsaf’s estimates: g = 30%, σ = (65% + 5%)/6 = 11.67% the EBIT coverage ratio is

[1 − 3.09 σ/(1 + g)]−1 = 1.4×, for a 0.1% probability of shortfall. (Note that for normally distributed growth, a range ±3σ about the mean has 99% probability, which means that 1/6 the range provides an estimation of σ. For more on this see Section 8.2.) ForWirst’s estimates:

g = 5%, σ = (65% + 55%)/6 = 21.67%, the coverage ratio is [1 − 3.72 σ/(1 + g)]−1 =

4.3×, for a 0.01% probability of shortfall. Note that in this case the coefficient of σ has been changed to 3.72 because a deviation below −3.72σ has a probability of 0.01% for a normally distributed growth rate.