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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 )

image text in transcribed 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 \40. The CFO has estimated next year's EBIT for three possible states of the world: \\( \\$ 5.5 \\) million with a 0.2 probability, \\( \\$ 2.8 \\) million with a 0.5 probability, and \\( \\$ 0.4 \\) 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 0 . \\[ \\begin{aligned} \\text { RE } & = & \\% \\\\ \\sigma & = & \\% \\\\ \\mathrm{CV} & = & \\end{aligned} \\] \beginarrayrlrltextDebt/Capitalratiois10 Debt/Capital ratio is \50, interest rate is \11. \\[ \\begin{aligned} \\text { RE } & = & \\% \\\\ \\sigma & = & \\% \\\\ \\mathrm{CV} & = & \\end{aligned} \\] Debt/Capital ratio is \60, interest rate is \14. \\[ \\begin{aligned} \\text { RE } & = & \\% \\\\ \\sigma & = & \\% \\\\ \\mathrm{CV} & = & \\end{aligned} \\]

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