909 1 poets dlock eferences Charny Inc. has no debt outstanding and a total market value of $200,000. Earnings before interest and taxes, EBIT, are projected to be $30,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 18% higher. If there is a recession, then EBIT will be 20% lower. Charny is considering a $75,000 debt issue with an interest rate of 8%. The proceeds will be used to repurchase shares of stock. There are currently 8,000 shares outstanding. Ignore taxes for questions a and b Assume the company has a market to book ratio of 1.0. a-1. Calculate return on equity (ROE) under each of the three economic scenarios before any debt is issued. (Enter your answer as a percentage rounded to 2 decimal places.) NOE Recession Normal Expansion 6-2. Calculate the percentage changes in ROE when the economy expands or enters a recession. (Do not round intermediate calculations. Negative answers should be indicated by a minus sign. Enter the answers as a percent rounded to the nearest whole number.) Expansion change in RO 18% Assume the firm goes through with the proposed recapitalization b-1. Calculate the return on equity (ROE) under each of the three economic scenarios. (Enter your answer as a percentage rounded to 2 decimal places.)