Two firms, Red and Purple, have identical annual EBIT (no tax); Firm Red has $2000

Equity and Firm Purple has $500 Equity and $1500 Debt at 5% of interest. Assume 4

possible outcomes for Firm Red as below (the 4 outcomes occur with the same probability).

Outcome 1	Outcome 2	Outcome 3	Outcome 4
EBIT=300	EBIT=200	EBIT=150	EBIT=50

What are the ROE for firm Red and Firm Purple?

What are the ROE Standard deviations for Firm Red and Firm Purple?