Waco Manufacturing Company has a cash balance of $550 million. Free cash flows during a projected 1-year recession are expected to be $350 million with a standard deviation of $500 million. Assume that free cash flows are approximately normally distributed.

Show percentages to two decimal places. 10.123% would be entered as 10.12%.

• Determine the probability that Waco will run out of cash during the recession. %
• Waco is considering a change in its capital structure that would add $75 million (after taxes) to its fixed financial charges. Determine the probability of running out of cash if the change in capital structure is undertaken.
• Determine the maximum additional fixed financial charges that Waco can incur if it is willing to tolerate only a 5% chance of running out of cash during the recession. $