accept 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) Boom 560 Base 125 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. B Attempt 1/5 for 10 pts. 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 Number of shares outstanding 89 Part 2 B Attempt 1/5 for 10 pts. What are the expected earnings per share (EPS) during a bust? Corrent rart The interest rate on the debt is 12%. What are the expected earnings per s (EPS) during a boom after the restructuring? Correct Interest = Debt Interest rate = 31 * 0.12 = 3.72 (million) Since there are no taxes: Net income = EBIT - interest = 560 -3.72 = 556.28 Net income 556.28 EPS = . = 6.5 Number of shares outstanding 85.59 Boom EPS has increased from $6.29 to $6.5, showing the effect of leverage (magnification). ding = 556;28 = 6.5 Part 5 IBAttempt 175 for 10 p What are the expected earnings per share (EPS) during a bust after the restructuring? 1+ decimals Submit