Repeat parts (a) and (b) in Problem 1 assuming the company has a tax rate of 21

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Repeat parts (a) and (b) in Problem 1 assuming the company has a tax rate of 21 percent. Assume the stock price is constant under all scenarios.

Data From Problem 1

a. Calculate earnings per share, EPS, under each of the three economic scenarios before any debt is issued. Also calculate the percentage changes in EPS when the economy expands or enters a recession.

b. Repeat part (a) assuming that the company goes through with recapitalization. What do you observe?

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Related Book For answer-question

Corporate Finance

ISBN: 978-1259918940

12th edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan

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Question Posted: Dec 09, 2019 07:31 AM

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Repeat parts (a) and (b) in Problem 1 assuming the company has a tax rate of 21

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a A table outlining the income statement with taxes for the three possible states of the ec...View the full answer

Corporate Finance

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