Dan Inc is being sued by Crusty Corp. The complaint was filed on June 2020. Crusty is suing for $10M in damages and $500,000 in legal fees.

Assume Dan Inc has the following outcomes:

i. A 55% chance of not being sued

ii. A 10% chance having to pay all the costs and damages

iii. A 35% change of having to pay half the of the damages and costs

Questions:

1. Estimate the loss.

2. How will the results of the lawsuit affect Dan Inc's EPS and debt-to-equity ratios calculations?

Use IFRS as a framework.