The Rivoli Company has no debt outstanding, and its financial position is given by the following data The firm is considering selling bonds and simultaneously repurchasing some of its stock If it moves to a capital structure with 30 debt based on market values, its cost of equity, , will increase to 11 to reflect the increased risk Bonds can be sold at a cost, , of 7 Rivoli is a no growth firm Hence, all its earnings are paid out as dividends Earnings are expected to be constant over time What effect would this use of leverage have on the value of the firm Answer What would be the price of Rivolis stock What happens to the firms earnings per share after the recapitalization The $500,000 EBIT given previously is actually the expected value from the following probability distribution Determine the times interest earned ratio for each probability What is the probability of not covering the interest payment at the 30 debt level I only need to know how to do the last question Please explain how to get I The answer is 10 ,, how do you get that number I have to use a FINANCE CALCULATOR PLease explain using that method We are not allowed excel for the test, and I actually want to know how to do this problem Thank you in advance

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The Rivoli Company has no debt outstanding, and its financial position is given by the following data: The firm is considering selling bonds and simultaneously

The Rivoli Company has no debt outstanding, and its financial position is given by the following data:

The firm is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 30% debt based on market values, its cost of equity, , will increase to 11% to reflect the increased risk. Bonds can be sold at a cost, , of 7%. Rivoli is a no-growth firm. Hence, all its earnings are paid out as dividends. Earnings are expected to be constant over time.

What effect would this use of leverage have on the value of the firm?
Answer .
What would be the price of Rivolis stock?
What happens to the firms earnings per share after the recapitalization?
The $500,000 EBIT given previously is actually the expected value from the following probability distribution:
Determine the times-interest-earned ratio for each probability. What is the probability of not covering the interest payment at the 30% debt level?

**********I only need to know how to do the last question!!!!!!!!!!!! Please explain how to get I.. The answer is 10%.,, how do you get that number? I have to use a FINANCE CALCULATOR. PLease explain using that method. We are not allowed excel for the test, and I actually want to know how to do this problem. Thank you in advance****