ABC plc is currently an all-equity firm that has no debt in its capital structure. The share price of the firm is 5. Currently, there are 100,000 shares outstanding. Assume there are no taxes. As a part of its growth strategy, the firm has decided to issue new debt to meet its funding requirements. The debt will be introduced to the capital structure through the issue of bonds. The total value of the bonds will be 250,000. The interest rate of the bonds will be 10%. The firm's earnings are forecasted and presented through three possible economic scenarios: recession, stable and boom time. The EBIT (Earnings Before Interest and Tax) in each scenario are as shown in the table below: EBIT () Recession Stable 50,000 100,000 Boom 200,000 a) Calculate the ROE (Return on Equity) of ABC plc in each scenario under the original capital structure (all-equity). [10] b) Calculate the ROE of ABC plc in each scenario under the capital structure including debt. [10] c) If the tax rate is 20%, what is the ROE of ABC plc in each scenario under the capital structure including debt? [10] d) If the firm's earnings forecasts under each scenario have the probability distributions as shown in the table below, what is the expected EPS (Earnings per Share) under the capital structure with debt? Assume there are no taxes. [10] Recession Stable Boom Probability EBIT () 20% 50% 30% 8,000 10,000 12,000 e) What is the value of the ABC plc under the capital structure with debt? [10]