You are evaluating a farm with a return on assets of 10%, a debt-to-equity ratio of 1, the interest rate on debt of 5%, a tax rate of 20%, and consumption of 50%.
A. Find the growth rate.
B. Now assume that the return on assets of 10% is the expected return and the standard deviation of r is .06. Find the growth rate and standard deviation of growth.
C. Now assume that you also have a variable rate loan and the 5% interest rate is only the expected rate. Interest also has a standard deviation of .03. Find the growth rate and standard deviation of growth.