Depending on the demand for your product, your sales are expected as follows: Demand Prob. Sales Low 0.2 41 Medium 0.7 53 High 0.1 70 EBIT is expected to be 23% of sales and the average tax rate is 34. There is no debt, the market value of equity is 430 and there are 40 shares outstanding. The company is thinking of borrowing $250 at an interest rate of 6% to repurchase its shares at the current market value. Part 1 What is the standard deviation of ROIC before the recapitalization? 5+ decimals

Depending on the demand for your product, your sales are expected as follows: Demand Prob. Sales Low 0.2 41 Medium 0.7 53 High 0.1 70 EBIT is expected to be 23% of sales and the average tax rate is 34. There is no debt, the market value of equity is 430 and there are 40 shares outstanding. The company is thinking of borrowing $250 at an interest rate of 6% to repurchase its shares at the current market value. Part 1 What is the standard deviation of ROIC before the recapitalization? 5+ decimals

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter14: Security Structures And Determining Enterprise Values

Section: Chapter Questions

Problem 10EP

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