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%

Question

Quizplus · Accepted Answer

z = ($9.0 - $22.0)/16.0 = -0.81
From Table V, at z = - 0.81;p = 0.2090

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