5.
Coefficient of variation (LO1) Sam Sung is evaluating a new advertising program that
could increase electronics sales. Possible outcomes and probabilities of the outcomes are
shown below. Compute the coefficient of variation.
Possible Outcomes
Ineffect
1.
Cash flow (LO2) Assume a corporation has earnings before depreciation and taxes of
$100,000, depreciation of $50,000, and that it has a 30 percent tax bracket. Compute its
cash flow using the format below.
Earnings before depreciation and taxes
Depreci
4.
Aftertax cost of debt (LO3) Telecom Systems can issue debt yielding 8 percent. The
company is in a 35 percent bracket. What is its aftertax cost of debt?
11-4.
Solution:
Telecom Systems
Kd
8.
= Yield (1 T)
= 8% (1 .35)
= 8% (.65)
= 5.20%
Aftertax cost
2.
Bond value (LO3) Applied Software has $1,000 par value bonds outstanding at 12 percent
interest. The bonds will mature in 25 years. Compute the current price of the bonds if the
present yield to maturity is:
a. 11 percent.
b. 13 percent.
10-2.
c. 16 pe
Chapter 13 - Problem 6: Coefficient of Variation (L01)
Possible outcomes for three investments and their probabilities of occurrence are given below.
Alternatives
1
2
3
Outcomes
Failure
Acceptable
Successful
Probablitity
Outcomes
Probablitity
Outcomes
Pro