Question: Question 1 . ( 2 0 points ) EBIT and Leverage [ LO 1 ] Ghost, Inc., has no debt outstanding and a total marketvalue

Question 1.(20 points) EBIT and Leverage [LO1] Ghost, Inc., has no debt outstanding and a total
marketvalue of $185,000. Earnings before interest and taxes, EBIT, are projected to be $29,000 if
economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 30
percent higher. If there is a recession, then EBIT will be 40 percent lower. The company is considering
a $65,000 debt issue with an interest rate of 7 percent. The proceeds will be used to repurchase shares
of stock. There are currently 7,400 shares outstanding. Ignore taxes for this problem.

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