Tanner%20ROE

# Tanner%20ROE - 0.1021 Coefficient of Variation = 0.3933...

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Tanner ROE Dr. Carney FRL 301 D/D+E = D/A = 40% Leverage Ratio A = 8.00 \$ Assets Therefore: D = 3.20 \$ Debt E = 4.80 \$ Equity V = A = D+E = 8.00 \$ Value=Assets=Debt+Equity Interest Rate = 10% Contract Rate of Interest on the Debt Tax Rate = 30% Marginal Tax Bracket 30% Case 50% Case 20% Case Probability 30% 50% 20% NOI 3.000 2.000 1.000 Interest 0.320 0.320 0.320 TI (=BTCF) 2.680 1.680 0.680 Tax 0.804 0.504 0.204 NI=EAC 1.876 1.176 0.476 ROE = EAC/E 0.391 0.245 0.099 Probability ROE=EAC/E Prob*ROE Deviation Dev^2 Prob*Dev^2 30% 0.391 0.117 0.131 0.0172 0.0052 50% 0.245 0.123 -0.015 0.0002 0.0001 20% 0.099 0.020 -0.160 0.0257 0.0051 Mean = 0.260 Variance = 0.0104 Standard Deviation =

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Unformatted text preview: 0.1021 Coefficient of Variation = 0.3933 Expected Rate of Return = 26.0% Absolute Risk (SD) = 10.2% Relative Risk (CV) = 39.3% Tanner ROE Dr. Carney FRL 301 Summary 3 levels of NOI and 3 levels of financial leverage Low Medium High Leverage Leverage Leverage LL ML HL D/(D+E) = D/A = 10% 40% 70% ROE for NOI=3.000 28.4% 39.1% 71.2% <<<Homewo ROE for NOI=2.000 18.7% 24.5% 42.0% ROE for NOI=1.000 8.9% 9.9% 12.8% Expected Rate of Return = 19.6% 26.0% 44.9% Absolute Risk (SD) = 6.8% 10.2% 20.4% Relative Risk (CV) = 34.7% 39.3% 45.5%...
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## This note was uploaded on 03/28/2008 for the course FRL 301 taught by Professor Carney during the Spring '08 term at Cal Poly Pomona.

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Tanner%20ROE - 0.1021 Coefficient of Variation = 0.3933...

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