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.
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
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?
= Yield (1 T)
= 8% (1 .35)
= 8% (.65)
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.
c. 16 pe
Chapter 13 - Problem 6: Coefficient of Variation (L01)
Possible outcomes for three investments and their probabilities of occurrence are given below.