Complete the information for the ROE and the EPS for each of the following tables. For this example, a firm currently has a capital structure that is 100% equity but is proposing a new capital structure that is 50% equity and 50% debt. Under the proposal they have issued debt for the sole purpose of buying back a portion of the equity. Why do we assume the stock price stays the same? Current Proposed Assets $9,000,000 $9,000,000 Debt $0 $4,500,000 Equity $9,000,000 $4,500,000 Debt/Equity Ratio 0 1 Share Price $20 $20 Shares Outstanding 450,000 225,000 Interest rate 10% 10% Current Capital Structure: No Debt Proposed Capital Structure: Debt = $4.5 million Recession Expected Expansion Recession Expected Expansion EBIT $500,000 $1,500,000 $2,500,000 EBIT $500,000 $1,500,000 $2,500,000 Interest 0 0 0 Interest 450,000 450,000 450,000 Net Income $500,000 $1,500,000 $2,500,000 Net Income $50,000 $1,050,000 $2,050,000 ROE ROE EPS EPS