A epl.com Solve problem Problem 8 Intro Zambezi Corp. expects EBIT to vary with the state of the economy as follows: State of economy EBIT (in $ million) 560 Boom 125 Base Bust -200 Zambezi doesn't have any long-term debt and has 89 million shares outstanding, currently trading at $9.09. Because of political connections, it doesn't pay any taxes. Attempt 1/5 for 10 pts. B Part 1 What are the expected earnings per share (EPS) during a boom? Correct Since the company doesn't have any debt, it doesn't pay interest. It also doesn't pay taxes. Therefore, EBIT and net income are the same in this case: Net income 560 =6.29 89 EPS Number of shares outstanding Attempt 1/5 for 10 pts. B Part ? Since there are no taxes, the restructuring does not affect the share price. Given the stock price of $9.09, borrowing $31 million allows the firm to repurchase $31 million /$9.09 shares. The new number of shares outstanding is thus: 31 Nnew 89- 85.59 (million) 9.09 Attempt 2/5 for 8 pts. B Part 4 The interest rate on the debt is 12%. What are the expected earnings per share (EPS) during a boom after the restructuring? 1+ decimals Submit Show all parts