Question: You are evaluating a farm with a return on assets of 10%, a debt-to-equity ratio of 1, interest rate on debt of 5%, a tax

  1. You are evaluating a farm with a return on assets of 10%, a debt-to-equity ratio of 1, interest rate on debt of 5%, a tax rate of 20%, and consumption of 50%
    1. Find the growth rate.
    2. Now assume that the return on assets of 10% is the expected return and the standard deviation of r is .06. Find the growth rate and standard deviation of growth.
    3. Now assume that you also have a variable rate loan and the 5% interest rate is only the expected rate. Interest also has a standard deviation of .03. Find the growth rate and standard deviation of growth.

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