QUESTIONS AND PROBLEMS Basic (Questions 115} 1 EBET and Leverage (L01) Charny Inc. has no debt outstanding and a total market value of $1 55.0012}. Earnings before interest and taxes, EBIT, are projected to be $21,000 it economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 20 percent higher. If there is a recession, then EBIT will be 25 percent lower. Chamy is considering a $80.00 debt issue with a T percent interest rate. The proceeds will be used to repurchase shares of stock. There are currently 5,50!) shares outstanding. Ignore taxes tor this problem. a Calculate earnings per share {EPS} under each of the three economic scenarios before any debt is issued. Also calculate the percentage changes in EPS when the economy expands or enters a recession. a Repeat part to} assuming that the company goes through with recapitalization. What do you observe? EBIT, Taxes, and Leverage {L02} Repeat parts (a) and {b} in Problem 1 assuming Chamy has a tax rate of 35 percent