Assume the probability distributions for R and R* are normal, and you are given the following...

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Assume the probability distributions for R and R* are normal, and you are given the following information: T R*T= 12% (R*T) = 5% T =.50 Management is considering changing from its current unlevered capital structure to a capital structure with L=.50. You have been asked to write a memo showing and discussing the advantages and disadvantages of the proposed change. In your memo, specifically address the impact on having a positive value for R, the probability of doing worse than the worst possible R for L = 0, and the probability of doing better than the best possible R for L = 0. kd = 14% Assume the probability distributions for R and R* are normal, and you are given the following information: T R*T= 12% (R*T) = 5% T =.50 Management is considering changing from its current unlevered capital structure to a capital structure with L=.50. You have been asked to write a memo showing and discussing the advantages and disadvantages of the proposed change. In your memo, specifically address the impact on having a positive value for R, the probability of doing worse than the worst possible R for L = 0, and the probability of doing better than the best possible R for L = 0. kd = 14%

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Memo Impact of Leveraging Capital Structure on Return Distribution To Management Team From Your Name Date Date Subject Analysis of Leveraging Capital ... View the full answer