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?

8Using the same information from Question 7, what is the ROE during a recession for the current capital structure? A. 9.27 percent B. 11.50 percent C. 13.33 percent D. 15.55 percent E. 17.58 percent