A B C E 1 2 Problem 5 (2 x 10 = 20 points) 3 Gamma Group has $260 million in assets and is financed with 40% debt and 60% equity. 4 The cost of debt is 6.5% (before taxes). 5 Corporate taxes are 21% 6 The marketing department has figured out two scenarios for next year: 7 1. EBIT will be $5 million (probability: 30%) 2. EBIT will be $55 million (probability: 70%) 9 10 Questions: H 11 a) Calculate the R.O.E. (Return On Equity) in each of the 2 scenarios. 12 b) Calculate the mean and standard deviation from the ROE (probabilities taken into account). 13 14 15 16 17