1# Fujita, Inc., Debt outstanding in a total market value of 222,000. Earnings before interest and taxes, EBIT, are projected to be $18,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 25% higher. If there is a recession, then EBIT will be 30% lower. The company is considering a $60,000 debt issue with an interest rate of 7%. The proceeds will be used to repurchase shares of stock. There are currently 7,400 shares outstanding. Ignore taxes for this problem.

#2 EBIT, taxes, and leverage Repeat parts (a) and (b) in problem one assuming the company has a tax rate of 21%, a market to book ratio of 1.0, and the stock price remains constant.