Evaluate the effect of the current sales volatility

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Reference no: EM131881383

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.

Reference no: EM131881383

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