ASG Expects Next Year's Operating Income (EBIT) to Equal $22

question 48

Multiple Choice

ASG expects next year's operating income (EBIT) to equal $22 million, with a standard deviation of $16 million.The coefficient of variation of operating income is equal to 0.73.Interest expenses will be $9 million next year and debt retirement will require a principal payment of $2.5 million.ASG's marginal tax rate is 40%.If EBIT is normally distributed, what is the probability that ASG will have a negative EPS next year?

• A)20.9%
• B)25.5%
• C)23.3%
• D)25.8%

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