Current	Proposed				Current Capital Structure: No Debt					Proposed Capital Structure: Debt = $ 3 million
Assets	$6,000,000	$6,000,000					Recession	Expected	Expansion			Recession	Expected	Expansion
Debt	$0	$3,000,000				EBIT	$400,000	$800,000	$1,200,000		EBIT	$400,000	$800,000	$1,200,000
Equity	$6,000,000	$3,000,000
Debt/Equity Ratio	0	1
Share Price	$20	$20
Shares Outstanding	300,000	150,000
Interest rate	N/A	10%
a) Calculate the Interest, Net income, ROE, and EPS for the current and proposed capital structure.
b) Calculate the Breakeven EBIT.

K P M N 0 Proposed Capital Structure: Debt = $ 3 million Recession Expected Expansion EBIT $400,000 $800,000 $1,200,000 B C D E F. G H 1 Current Proposed Current Capital Structure: No Debt 2 Assets $6,000,000 $6,000,000 Recession Expected Expansion 3 Debt $O $3,000,000 EBIT $400,000 $800,000 $1,200,000 4 Equity $6,000,000 $3,000,000 5 Debt/Equity Ratio 0 1 6 Share Price $20 $20 7 Shares Outstanding 300,000 150,000 8 Interest rate N/A 10% 9 10 11 a) Calculate the Interest, Net income, ROE, and EPS for the current and proposed capital structure. 12 b) Calculate the Breakeven EBIT