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FINANCIAL LEVERAGE EFFECTS The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ratios. Neal's total capital is $18

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FINANCIAL LEVERAGE EFFECTS The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ratios. Neal's total capital is $18 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: $6 million with a 0.2 probability, $1.7 million with a 0.5 probability, and $0.5 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 ratio is o ROE % % CV Debt/Capital ratio is 10%, interest rate is 9% ROE % 0 Debt/Capital ratio is 50%, interest rate is 11%. ROE % CV Debt/Capital Patio is 60%, Interest rate is 14% ROE -% CV

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