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

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? Assume the stock price remains constant.