1 nts Problem 16-1 EBIT and Leverage [LO1] Fujita, Incorporated, has no debt outstanding and a total market value of $150,000. Earnings before interest and taxes, EBIT, are projected to be $32,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 10 percent higher. If there is a recession, then EBIT will be 30 percent lower. The company is considering a $75,000 debt issue with an interest rate of 6 percent. The proceeds will be used to repurchase shares of stock. There are currently 10,000 shares outstanding. Ignore taxes for this problem. a-1. Calculate earnings per share (EPS) under each of the three economic scenarios before any debt is issued. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g,, 32.16.) a-2. Calculate the percentage changes in EPS 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.g., 32.16.) b-1. Calculate earnings per share (EPS) under each of the three economic scenarios assuming the company goes through with recapitalization. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b-2. Given the recapitalization, calculate the percentage changes in EPS 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.g., 32.16.) "TT aI TA"; C "i F i "T ET ViCiT FTC economy expands or enters a recession. (A negative answer should be indicate by a minus sign. Do not round intermediate calculations and enter your answe as a percent rounded to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. a-1. Recession EPS $ 2.24 a-1. Normal EPS $ 3.20 a-1. Expansion EPS $ 3.50 a-2. Recession percentage change in EPS 30.00 % a-2. Expansion percentage change in EPS 9.00% b-1. Recession EPS $ 4.48 b-1. Normal EPS $ 5.50 b-2. Expansion EPS 6.14 b-2. Recession percentage change in EPS 18.55 % b-2. Expansion percentage change in EPS 11.64 % F