Fujita, Incorporated, has no debt outstanding and a total market value of $ Earnings before interest and taxes, EBIT, are projected to be $ if economic conditions are normal. If there is strong expansion in the

economy, then EBIT will be  percent higher. If there is a recession, then EBIT will be  percent lower. The company is considering a $ debt issue with an i nterest rate of  percent. The proceeds will be used to repurchase shares of stock. There are currently  shares outstanding. The company has a tax rate of  percent, a markettobook ratio of  and the stock price remains constant. 

 

a Calculate earnings per share, EPS, under each of the three economic scenarios before any debt is issued.

Note: Do not round intermediate calculations and round your answers to decimal places, eg

a Calculate the percentage changes in EPS when the economy expands or enters a recession.

Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to the nearest whole number, eg

b Calculate earnings per share, EPS, under each of the three economic scenarios after the recapitalization.

Note: Do not round intermediate calculations and round your answers to decimal places, eg

b Calculate the percentage changes in EPS when the economy expands or enters a recession assuming recapitalization has occurred.

Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to decimal places, eg

Answer rating: 100% (QA)

a1 First lets calculate the earnings per share EPS under each of the three economic scenarios before any debt is issued Normal Economic Conditions EBI... View the full answer