I. If Sunday Scaries has an EBIT of $25,000,000 and an interest rate of 6%, what is the ROE of the firm after repurchasing shares?

II. Solve for the breakeven EBIT that would render equivalent EPS values under the current and proposed capital structure.

Current Structure Proposed Assets $360,000,000 $360,000,000 Debt $0 $120,000,000 Equity $360,000,000 $240,000,000 D/E Ratio .50 Interest Rate N/A Shares Outstanding 12,000,000 8,000,000 Share Price $30 $30 Current Structure Proposed Assets $360,000,000 $360,000,000 Debt $0 $120,000,000 Equity $360,000,000 $240,000,000 D/E Ratio .50 Interest Rate N/A Shares Outstanding 12,000,000 8,000,000 Share Price $30 $30