The Following Table Shows the Results of a Survey of 440

question 159

Essay

The following table shows the results of a survey of 440 authors by a (fictitious) publishing company: $$\begin{array} { | l | l | l | l | } \hline & \begin{array} { l } \text { New } \\\text { Authors }\end{array} & \begin{array} { l } \text { Established } \\\text { Authors }\end{array} & \text { Total } \\\hline \text { Successful } & 80 & 40 & 120 \\\hline \text { Unsuccessful } & 140 & 180 & 320 \\\hline \text { Total } & 220 & 220 & 440 \\\hline\end{array}$$ ​
An author is chosen at random.
Compute the estimated probability that the author is established.

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Definitions:

Unlevered Firms

Companies that operate without the use of borrowed money or financial leverage.

M&M Proposition II

A theory proposing that the cost of equity for a leveraged firm increases linearly with its level of debt, holding the cost of debt constant.

Cost of Equity

The return a company requires to decide if an investment meets capital return requirements and is used in calculating the weighted average cost of capital.

Debt/Equity Ratio

A financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets, often used to gauge financial health and risk.