Current cap. structure	Proposed cap. structure
Assets	$15 million	$15 million
Debt	$0	$6 million
Equity	$15 million	$9 million
Share price	$25.00	$22.50
Shares outstanding	600,000	???
Bond coupon rate	N/A	8%

EBIT is expected to be $2.5 million, but could be as high as $3.5 million if an economic expansion occurs, or as low as $2 million if a recession occurs. All values are market values. There are no taxes. What is EPS during an expansion for the proposed capital structure?

Multiple Choice

• $4.17

• $6.00

• $5.83

• $7.55

• $5.00