Problem 16-3 ROE and Leverage (L01, 2] 1 1111 ginta Fullte. Incorporated, has no debt outstanding and total market value of $230,400. Earnings before interest and taxes, EBIT, are projected to be $39.000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 13 percent higher. If there is a recession, then EBIT will be 24 percent lower. The company is considering . $125.000 debt issue with an interest rate of 6 percent The proceeds will be used to repurchase shares of stock. There are currently 7,200 shares outstanding. Ignore taxes for questions (6) and (bl. Assume the company has a market- to-book ratio of 1.0 and the stock price remains constant .-1 Calculate return on equity (ROE) under esch of the three economic scenarios before sny debts sued. Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places. e... 3216.) --2 Calculate the percentage changes in ROE when the economy expands or enters 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... 3216.) b-1. Assume the firm goes through with the proposed recapitalization. Calculate the return on equity ROE under esch of the three economic scenarios. (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places. e... 3216.) b-2. Assume the firm goes through with the proposed recapitalization. Calculate the percentage changes in ROE when the economy expands or enters 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.... 32.16.) Rare 3-1. Recession RCE 6-1. Normal ROE 3-1. Expansion ROE 3-2. Recession percentage change in ROE 3-2. Expansion percentage change in ROE 6-1. Recession ROE -1. Nomal ROE -1. Expansion ROE 6-2. Rassion percentage change in ROE 6-2. Expansion percentage change in ROE Assume the firm has a tax rate of 22 percent. c-1 Calculate return on equity (ROE) under esch of the three economic scenarios before sny debt is issued. (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places. e.g., 3216.) c-2 Calculate the percentage changes in ROE when the economy expands or enters 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.) 3. Calculate the return on equity (ROE) under esch of the three economic scenarios assuming the firm goes through with the recapitalization (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places. e... 3216.) 44. Given the recapitalization calculate the percentage changes in ROE 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... 32.16.) 0-1. Recension RCE 0-1. Norma ROE 0-1. Expansion ROE 0-2. Recession percentage change in ROE 0-2. Expansion percentage change in ROE 0-3. Rocession ROE 0-3. Normal ROE 0-8. Expansion ROE 0-4. Recession percentage change in ROE 0-4. Expansion percentage change in ROE