Question:
The expected EBIT of Krupa Co next year is $20 million with standard deviation of $4 million. The tax rate of Krupa is 30% and it has 10 million shares of common, stock. Krupa has to pay $8 million in interest and $5 million in a sinking fund.
What is the probability that Krupa will be able to pay a dividend of $1 per share next year and still have some money left over as retained earnings?