River Cruises (see Section 16.1) is all-equity-financed. Suppose it now issues $250,000 of debt at an interest rate of 10% and uses the proceeds to repurchase 25,000 shares. Assume that the firm pays no taxes and that debt finance has no impact on firm value. Rework Table 16.3 by selecting values for (a) to (j) below to show how earnings per share and share return vary with operating income after the financing

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Data Number of shares Price per share Market value of shares Market value of deb 50,000 $10 $500,000 $500,000 Outcomes State of the Economy Slump $75,000 $50,000 $25,000 $.50 5% Normal Boom 25,000175,000 50,00050,000 Operating income Interest Equity earnings Earnings per share Return on shares 5,000 125,000 1.50 15% 2.50 25% Expected outcome Number of shares Price per share Market value of shares$1 million Current Data 00,000 $10 Outcomes State of the Economy Normal $125,000 $175,000 Slump Boom Profits before interest Interest Equity earnings Earnings per share Return on shares $75,000 0) Expected outcome