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
Ans: E. $9.72
Business
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