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FINANCIAL LEVERAGE EFFECTS The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ration. Neal's total capital is $37

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FINANCIAL LEVERAGE EFFECTS The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ration. Neal's total capital is $37 milion, 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 he estimated next year's EBIT for three possible states of the world: $5.2 million with a 0.2 probability, 51.5 million with a 0.5 probability, and $0.4 million with a 0. probability Calculate Near's expected RO, standard deviation, and coefficieet 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 rato is . RE- O- CV- Debt/Capital ratio is 10%. Interest rate is 9%. ROE- O- CV Debt Capital ratio is 50%, interest rate is 11% RE O CV- Debt Capital ratio is 60%, interest rate is 14% ROE 9 CV

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