Tasks to complete

space Inc. has a 19 percent tax rate and $100 million in assets, financed entirely with equity. Equity is worth $16 per share, and the book value of equity equals the market value of equity. Assume that the firms expected values for EBIT depend upon which state of the economy occurs this year, with the possible values of EBIT and their associated probabilities shown as follows:

STATE	PESSIMISTIC	OPTIMISTIC
Probability of state	0.45	0.55
Expected EBIT	$7 million	$21 million

The firm is considering switching to a 40 percent debt capital structure and has determined that it would have to pay a 12 percent yield on perpetual debt. Address the following questions:

What will be the break-even level of EBIT?

What are the EPS and ROE of the firm?

Assuming the unlevered beta of the firm is 0.9, and its levered beta will increase to 1.35, calculate the firm's WACC if the market risk premium is 7.2%.

Based on the outcomes, what would you recommend to spasce Inc.?

Show all of your workings in Excel.