Equal is equal to market value of equity

Assignment Help Financial Management

Reference no: EM131866091

Daddi Mac, Inc. doesn't facy any taxes and has 250.00 million in assets, currently financed entirely with equity. Equity is worth $30 per share, and book value of equity is equal is equal to market value of equity. Also, let's assume that the firm's expected values for EBIT depend upon which state of the economy occurs this year, with possible values of EBIT and their associated probabilities as shown below.

Probability of state 0.25 0.60 0.15

Expected EBIT in state 6,812,500 11,750,000 18,750,000

The firm is consdierings switching to a 25 percent debit capital structuef and has determined that it would have to pay a 9 percent yield on perpetual debt in either event. What will be the level of expected EPS if the firm switches to the proposed capital structure (Do no round intermediate calculations and round your final answer to 2 decimal places.)

Expected EPS--------?

Reference no: EM131866091

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