4 TB MC Qu. 16-65 Daddi Mac, Inc., doesn't face any...Daddi Mac, Inc., doesn't face any taxes and has $250 million in assets, currently financed entirely with equity. Equity is worth $20 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 stateof the economy occurs this year, with the possible values of EBIT and their associated probabilities shown as follows:StateRecessionAverageBoomProbability of stateExpected EBIT in state0.200.600.20$5 million $10 million $15 millionThe firm is considering switching to a 30 percent debt capital structure, and has determined that they would have to pay a 10 percent yield onperpetual debt. What will be the standard deviation in EPS if they switched to the proposed capital structure?

Here, Total Assets is $250 million Proposed Plan is : Debt is 30% Equity is 70% Equity per share is…

Answered: Daddi Mac, Inc., doesn't face any taxes…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter17: Dynamic Capital Structures And Corporate Valuation

Section: Chapter Questions

Problem 3P

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