Your Assignment Expected ROA 16 STD DEV ROA 4 Assets $8,000 M Interest rate 12 Debt $2,000 M Table 1 Given information Note if a probability is less than the smallest number on the chart, just answer the question 0 10 (smallest value on the chart) or you can find the probability using Excel What is the probability of Coverage Ratio (CR) 1 0 What is the probability of a CR 3 0 What is the maximum amount of debt the company can service and have a 3 probability that the coverage ratio will fall to 1 0 or less What is the maximum amount of debt the company can service and have a 10 probability that the coverage ratio will fall to 1 0 or less If the interest rate on debt is 14 instead of 12 and all other values in Table 1 are in effect, what is the probability of having a coverage ratio less than 1 0 (rework 1) If the interest rate is 14 , what debt ratio corresponds to a probability of a CR 1 of 15 (rework 3) very high debt What is the probability that the companys EBIT will be 0 or less (hint an EBIT of 0 corresponds what value for ROA Calculate a Z score for that ROA)

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Question: Your Assignment Expected ROA 16% STD DEV ROA 4% Assets $8,000 M Interest rate 12% Debt $2,000 M Table 1. Given information Note: if a

Your Assignment

Expected ROA	16%
STD DEV ROA	4%
Assets	$8,000 M
Interest rate	12%
Debt	$2,000 M

Table 1. Given information

Note: if a probability is less than the smallest number on the chart, just answer the question < 0.10% (smallest value on the chart) or you can find the probability using Excel.

What is the probability of Coverage Ratio (CR) < 1.0?
What is the probability of a CR < 3.0
What is the maximum amount of debt the company can service and have a 3% probability that the coverage ratio will fall to 1.0 or less?
What is the maximum amount of debt the company can service and have a 10% probability that the coverage ratio will fall to 1.0 or less?
If the interest rate on debt is 14% instead of 12% and all other values in Table 1 are in effect, what is the probability of having a coverage ratio less than 1.0? (rework #1)
If the interest rate is 14%, what debt ratio corresponds to a probability of a CR < 1 of 15%? (rework 3) very high debt
What is the probability that the companys EBIT will be 0 or less? (hint: an EBIT of 0 corresponds what value for ROA? Calculate a Z-score for that ROA)

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