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e Castle, Inc., has no debt outstanding and a total market value of $305,000 ings before interest and taxes, EBIT, are projected to be $26,000 if economic cind here is strong expansion in the economy, then EBIT will be 20 percent higher if there sa mcas f t hen EBIT will be 25 percent lower. The firm is considering a debt issue of $95,000 wh an ineret aea gi6 percent. The proceeds will be used to repurchase shares of stock There are currety 500s outstanding. Ignore taxes for this problem. a Calculate earnings per share, EPS, under each of the three economic scenarios before any detr ssd Also, calculate the percentage changes in EPS when the economy expands or enters arecession d. Repeat part (a) assuming that the firm goes through with recapitalization What do you obsarne e.com/RossCorebe 3. ROE and Leverage Suppose the firm in Problem 1 has a market-to-book ratio of 1.0 a. Calculate return on equity, ROE, under each of the three economic scenarios before any de bt is Also, calculate the percentage changes in ROE for economic expansion and recessic b. Repeat part (a) assuming the firm goes through with the proposed recapitalization c. Repeat parts (a) and (b) of this problem assuming the firm has a tax rate of 35 percent on ic comparing two different capital structures, an all-e