A B ary: Students please use the information, below to D Fujita, Inc., has no debt outstanding and 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 percent higher. If there is a recession, then EBIT will be 30 percent lower. The company is considering a $60,000 debt issue with an interest rate of 7 percent. The proceeds will be used to repurchase shares of stock. There are currently 7,400 shares outstanding. Assume the company has a tax rate of 21 percent, a market-to-book ratio of 1.0, and the stock price remains constant. 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. b. Repeat part (a) assuming that the company goes through with recapitalization. 23 E A1 234 A Alignment Number ins Delete Format Editing Formatting Table Styles Cells Xfx Accessibility tab summary: Students please use the information below to complete the question completing the required cells. Given information for this expands or enters a recession. B C b. Repeat part (a) assuming that the company goes through with recapitalization. Input Area: 5 6 Market value $222,000 7 EBIT $18,000 00 8 Expansion EBIT 25% 9 Recession EBIT 30% 10 Debt issue $60,000 11 Interest rate 7% 12 Shares outstanding 7,400 13 Tax rate 21% 14 45 15 (Use cells A6 to B13 from the given information to complete this question.) D E F G H J McGraw Hill Check Answer Check My Work Legend Graded cell: Le needed. Scratchpad: Us workspace AL A Number Styles fx Accessibility tab summary: Students please use the information, below to complete the question completing the required cell B C D 16 17 Output Area: 18 19 No debt with taxes Recession Normal Expansion 20 EBIT 21 Taxes 22 NI 23 EPS 24 Change EPS% 25 With debt and taxes 26 Share price 27 Shares repurchased 28 29 EBIT 30 Interest 31 EBT 1 Recession Normal Expansion Graded Worksheet + Calculation Mode: Automatic Workbook Statistics Type here to search E F G H 1 Undo Clipboard A1 A 29 EBIT 30 Interest 31 EBT 32 Taxes 33 NI 34 EPS 35 Change EPS% 36 37 38 39 40 41 42 43 44 45 Font Alignment Number Styles Xfx Accessibility tab summary: Students please use the information, below to complete the question completing the requ B C D E F G H Students: The scratchpad area is for you to do any additional work you need to solve this question or can be used to show your work. Nothing in this area will be graded, but it will be submitted with your assignment.