Repeat parts (a) and (b) in Problem 2 assuming the firm has a tax rate of 21
Question:
Repeat parts (a) and (b) in Problem 2 assuming the firm has a tax rate of 21 percent. Assume that the stock price will increase upon the announcement of the debt offering.
Data from Problem 2
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 firm goes through with recapitalization. What do you observe?
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a A table outlining the income statement with taxes for the three possible states of the economy is ...View the full answer
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Related Book For 
Corporate Finance Core Principles And Applications
ISBN: 9781260571127
6th Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan
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