Table 1: Probability Distribution of Sales
Variable Costs: 50% of Sales
Fixed Costs: $9,000,000
Marginal Tax Rate: 35%
Probability Distribution of Current Year's Sales
|
Prob.
|
Sales
|
|
Low
|
0.2
|
$20,000,000
|
|
Below Average
|
0.2
|
25,000,000
|
|
Average
|
0.2
|
30,000,000
|
|
Above Average
|
0.2
|
35,000,000
|
|
High
|
0.2
|
40,000,000
|
Probability Distribution of Forecasted sales for Next Year
|
|
Prob.
|
Sales
|
|
Low
|
0.3
|
$28,000,000
|
|
Average
|
0.4
|
33,000,000
|
|
High
|
0.3
|
38,000,000
|
1.Calculate the expected value, standard deviation, and the coefficient of variation of KT's sales for the current year.
2. Calculate the expected value, standard deviation, and the coefficient of variation of KT's ROE with the sales figures for the current year.
3. Evaluate the effect of the current sales volatility on the company's business risk.
4. Calculate the expected value, standard deviation, and the coefficients of variation of KT's sales and ROE with the sales forecast for next year.