15-5 M&M (Debt Policy Doesnt Matter) Example- River Cruises- All Equity financed Data Number of shares 100000 Price per share $10 m="""〓〓〓〓〓 Market Value of Shares S 1 million Outcome State of the economy Slump Expected Boom Operating Income $75,000125000175,000 Earnings per share $ 75 1.25 175 Return on shares 7.5 12.5% 17.5 Irwin/McGraw-Hill CThe McGraw-Hill Commpanies, Inc, 2001©The McGraw-Hill Companies, Inc.,2001 15- 5 Irwin/McGraw-Hill Example - River Cruises - All Equity Financed Return on shares 7.5% 12.5% 17.5% Earnings per share $.75 1.25 1.75 Operating Income $75,000 125,000 175,000 Slump Expected Boom Outcome State of the Economy Market Value of Shares $1million Price per share $10 Number of shares 100,000 Data M&M (Debt Policy Doesn’t Matter)