There is only one use of test markets: to determine the sales potential for a new product or service

Which of the following statements best describes the nature of a cash value loan?

A) It is a financial transaction in which the insurer loans the money and attaches a comparable portion of the cash value as collateral. B) It is a financial transaction in which future growth of the cash value is suspended until the loan amount plus interest is recovered. C) It is a financial transaction in which the cash value is reduced by the amount of the loan. D) It is a financial transaction in which the cash value is unaffected but the face amount is reduced by the amount of the loan plus interest."

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 8% There are no taxes. EBIT is expected to be $2.5 million, but could be as high as $3.5 million if an economic expansion occurs, or as low as $2 million 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. $8.39 E. $9.72