Help me understand this question using an Excel Spreadsheet (preferably) and or a financial calculator and whatever other means (e.g. algebra) to fully understand this question. A step-by-step analysis and explanation would be appreciated. Thanks!

Question 1

Sunrise, Inc., has no debt outstanding and a total market value of $150,000. Earnings before interest and taxes, EBIT, are projected to be $36,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 15 percent higher. If there is a recession, then EBIT will be 25 percent lower. The company is considering a $95,000 debt issue with an interest rate of 8 percent. The proceeds will be used to repurchase shares of stock. There are currently 6,000 shares outstanding. Ignore taxes for this problem. Assume the stock price is constant under all scenarios.

a-1. Calculate earnings

per share (EPS) under each of the three economic scenarios before any debt is

issued.(Do not round

intermediate calculations and round your answers to 2 decimal places, e.g.,

32.16.)

a-2. Calculate the percentage changes in EPS when

the economy expands or enters a recession.(A

negative answer should be indicated by a minus sign. Do not round intermediate

calculations and enter your answers as a percent rounded to 2 decimal places,

e.g., 32.16.)

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.)

b-2. Given the recapitalization, calculate the

percentage changes in EPS when the economy expands or enters a recession.(A negative answer should be indicated by a

minus sign. Do not round intermediate calculations and enter your answers as a

percent rounded to 2 decimal places, e.g., 32.16.)

There are ten different answers (four with percentages), to best explain this, I will provide the format that is required: