Up & Down Industries doesn't have any taxes to pay and has $348 million in assets, currently financed only with equity. The equity is worth $11 per share with 8 million shares outstanding, and book value of equity is equal to market value of equity. Assume that the firm's expected values for EBIT depend upon which state of the economy occurs this year, with the possible values of EBIT and their associated probabilities as follows:

State: Pessimistic; Probability = 45 percent; Expected EBIT in state = $15 million

State: Optimistic; Probability = 55 percent; Expected EBIT in state = $19 million

The company is considering switching to a 60 percent debt capital structure and has determined that it would have to pay a 10-percent yield on perpetual debt in either event. What would the level of expected EPS in either scenario be if the firm switches to the proposed capital structure as compared to its current structure?

A. Pessimistic state: $0.23 EPS; Optimistic state: $0.73 EPS

B. Pessimistic state: $0.35 EPS; Optimistic state: $0.88 EPS

C. Pessimistic state: $0.27 EPS; Optimistic state: $0.77 EPS

D. Pessimistic state: $0.32 EPS; Optimistic state $0.82 EPS