There Are No Taxes

question 298

Multiple Choice

There are no taxes. 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.

What is EPS under the current capital structure if there is a recession?

• A) $3.33
• B) $4.17
• C) $5.00
• D) $6.25

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Definitions:

Garage

A building or secured area designed for the storage and maintenance of vehicles.

Shed

A small building, typically made of wood or metal, used for storage or as a workshop, commonly found in gardens or backyards.

Sub-Bailment

A situation where a bailee (person who receives property) further entrusts the bailed property to another person, under a sub-bailment contract.

Original Bailor

The person who initially entrusts their property to another (the bailee) under an agreement for the property's temporary care or possession.