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6.2. Goiânia Corporation is expecting to have EBIT next year of $11 million, wit

ID: 2716668 • Letter: 6

Question

6.2. Goiânia Corporation is expecting to have EBIT next year of $11 million, with a standard deviation of $7 million. Goiânia has $35 million in bonds with coupon of 8%, selling at par, which are being retired at the rate of $2.5 million annually. Goiânia also has 200,000 shares of preferred stock, which pays annual dividend of $5.25 per share. The tax rate of Goiânia is 35%. Calculate the probability that Goiânia will not be able to pay interest, sinking fund, and preferred dividends, out of its current income, next year. Answer: 34.78%. Show solutions.

Explanation / Answer

34.78%

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6.2. Goiânia Corporation is expecting to have EBIT next year of $11 million, wit

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