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The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ratios. Neal's total capital is $17 million, It currently

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The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ratios. Neal's total capital is $17 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 25%. Neal is a small firm with average sales of $25 million or less during the past 3 years, so it is exempt from the interest deduction limitation. The CFO has estimated next year's EBIT for three possible states of the world: $5.1 million with a 0.2 probability, $2.5 million with a 0.5 probability, and $900,000 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. Debt/Capital ratio is o ROE: 9 0 CV: Debt/Capital ratio is 10%, Interest rate is 9%. ROE > 0 9 CV: Debt/Capital ratio is 50% Interest rate is 11% ROE: O: % CV: Debt Capital ratio is 600 Interest rate is 14% o . o IA G 6:55 PM Debt/Capital ratio is 50% Interest rate is 15% ROE: 0 CV: Debt Capital ratios 60, Interest rate is 1490 ROE

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