a)Given:

- Company A is ALL-EQUITY and has an asset base of $ 290,000,000

- Equity is worth $37/share

	Recession	Aversage inflation
Probability	25%	55%	20%
EBIT	$ 5,000,000	$ 10,000,000	$ 17,000

Calculate the expected EPS assuming the following:

- Company A is planning to switch to a 20% debt capital structure

- The company would have to pay an 8% on debt

b) Twice Shy Industries has a debtequity ratio of 1.5. Its WACC is 8.4 percent, and its cost of debt is 5.9 percent. The corporate tax rate is 35 percent. What is the companys cost of equity capital?