Question: QUESTION 1 MRR Inc has no debt outstanding and a total market value of $522,400. Earnings before interest and taxes, EBIT, are projected to be

QUESTION 1 MRR Inc has no debt outstanding and a total

QUESTION 1 MRR Inc has no debt outstanding and a total market value of $522,400. Earnings before interest and taxes, EBIT, are projected to be $55,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 14 percent higher. If there is a recession, then EBIT will be 20 percent lower. The company is considering a $205,000 debt issue with an interest rate of 6 percent. The proceeds will be used to repurchase shares of stock. There are currently 8,800 shares outstanding. The company has a tax rate of 23 percent, a market-to-book ratio of 1.0, and the stock price remains constant. Calculate earnings per share (EPS) under the situation of recession. 1.6 82 2. None of these 3.4.81 4.5 49

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