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Current Cap. Structure Proposed Cap. Structure
Assets $ 15 million $15 million
Debt $0 $6 million
Shares O/S 600,000 ?
Bond Int. Rate n/a 10%
Price per share = $25
There are no taxes. EBIT is expected to be $2.5 million, but could be 40% higher if an economic expansion occurs, or 20% lower if a recession occurs. All values are market values.
What is EPS during an expansion for the proposed capital structure?
A. $4.17
B. $5.03
C. $5.83
D. $8.06
E. $9.72
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