Your company doesn't face any taxes and has $265 million in assets, currently financed entirely with equity. Equity is worth $9.5 per share, and book value of equity is equal to market value of equity. Also, let's 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 shown below:

State

Pessimistic

Optimistic

Probability of State

.35

.65

Expect EBIT in State

$25 million

$65 million