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Problem 16-2 EBIT, Taxes, and Leverage [LO2] RAK, Inc., has no debt outstanding and a total market value of $150,000. Eamings before interest and taxes, EBIT, are projected to be $26,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT wll be 12 percent higher. If there is a recession, then EBIT will be 20 percent lower. RAK is considering a $90,000 debt issue with an interest rate of 6 percent. The proceeds will be used to repurchase shares of stock. There are currently 10,000 shares outstanding. RAK has a tax rate of 35 percent. a-1 Calculate eanings per share (EPS) under each of the three ecoriomic scenarios before any debt is issued (Do not round intermediate calculations and round your answers to 2 decimal places, e.g. 32.16) EPS Recession Normal Expansion a-2 Calculate the percentage changes in EPS when the economy expands or enters a recession. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) changes in EPS Expansion b-1 Calculate earnings per share (EPS) under each of the three economic scenarios assuming the company goes through with recapitalization. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g.. 32.16.) EPS Recession Normal