EPS ROA ROE EPS and ROE under Current (levered)Structure EBIT Interest Net income 1.8% 3.0% Recession $1,000 $1.50 640 $360 Proposed shares outstanding = 240 shares Expected $2,000 640 $1,360 6.8% $5.67 11.3% Expansion $3,000 640 $2,360 $9.83 11.8% 19.7% How an investor can invest in the unlevered firm but still get the same ROE as if he/she ght into a levered firm? an investor can invest in the levered firm but still get the same ROE as if he/she bought nlevered firm