Problem:

Blums, Inc., expects its operating income over the coming year to equal $1.5 million, with a standard deviation of $300,000. Its coefficient of variation is equal to 0.20. Blums must pay interest charges of $700,000 next year and preferred stock dividends of $240,000. Blums' marginal tax rate is 40 percent.

Required:

Question: What is the probability that Blums will have negative earnings per share next year? (Assume that operating income is normally distributed.)

Note: Explain all steps comprehensively.