3. 10.00 points RAK Inc, has no debit outstanding and a total market value of $220,000. Earnings before interest and wes, EBIT, are projected to be $26.000 if economic conditions aroma. If there is strong expansion in the economy, then EBIT will be 15 percent higher. If there is a recension, then EBIT will be 20 percent tower. RAK is considering a $120.000 debt issue with an interest rate of 8 percent. The proceeds will be used to repurchase shares of stock. There are currently 11.000 shares outstanding Ignore taxes for questions and Assume the company has a market to book ratio of 10 * Calculate retum anguly (ROE) under each of the three economic scenarios before any debt is Issued. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, .32.18) ROE Recession Normal Expansion 2 Calculate the percentage changes in ROE when the economy expands or enters a recession Negative amounts should be indicated by a minus sign. De not round Intermediate calculation Enter your answers as a percent rounded to 2 decimal places.12.16) change in ROE Recession Ansune the firm goes through with the proposed recapito - Calculate them on equity Roll under sach of the two economicos Do not round Intermediate calculation Enter your answers percent rounded to 2 decimal place. 12.10) ROE Recession Noma Expansion 1-2 Calculate the percentage changes in ROE When the economy and enters (Negative should the indicated by mine in De not found intermediate calculation, Enter your answer a percent rounded to 2 decimal places, 32.16) change in ROE Recension Expansion Assume the firm has a taxtate of 35 percent 0-1 Calculate retum on guilty (ROE) under each of the three economic sans before any deti Issued. Do not round Intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, -3216) ROE Recession Normal Expansion c-2 Calculate the percentage change in ROE when the economy expande or enters a recension (Negative amounts should be indicated by minus sign. De not round Intermediate calculations. Enter your answers as a percent rounded to decimal places, eg.12.16 change in ROE Recession Expansion 3 Chloe them on quity IROE) under sach of the three economic sonarios timing the form go through we recaptation. Do not found intermediate calculation Enter your awwers as a percent rounded to 2 decimal places, . 32.16) ROE Necessi Noma 64 ven the reception, calculate the percentage change in ROE when the economy expands of anters are in Negative amounts should be indicated by a minus in Round your answers to decimales 32.100 Nchange in ROE Expansion
