Question: Can you please show all work in the answer so I can do the steps on my own. Thank you! 1. (15 points) Baby Inc.

Can you please show all work in the answer so I can do the steps on my own. Thank you!

1. (15 points) Baby Inc. has no debt outstanding and a total market value of $211,875. Earnings before interest and taxes, EBIT, are projected to be $14,300 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 20% higher. If there is a recession, then EBIT will be 35% lower. The company is considering a $33,900 debt issue with an interest rate of 6 percent. The proceeds will be used to repurchase shares of tock. There are currently 7,500 shares outstanding. Ignore income taxes for this problem. a. Calculate EPS, under each of the three economic scenarios before any debt is issued. Also calculate the changes in EPS when the economy expands or enters a recession. b. Repeat (a.) assuming the company goes through with the recapitalization

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