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Question 9 - [10 points) AAA has 50 million shares outstanding, no debt and no preferred stocks. The firm is considering issuing $100 million of

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Question 9 - [10 points) AAA has 50 million shares outstanding, no debt and no preferred stocks. The firm is considering issuing $100 million of senior bonds at the interest rate of 10%. AAA's EBIT has average of $120 million and standard deviation of $30 million. The firm's tax rate is 20%. The financial analysts in Wall Street forecast the firm's EPS to be $1.3. Calculate the probability that AAA misses the analysts forecast if they issued the $100 million of bonds. Hint: you should start by finding the EBIT that gives the firm an EPS of $1.3 after they issued the bonds. Then, proceed with the probability calculations

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