ACME has no debt outstanding and a total market value of $$500,000.$ Earnings before interest andHow many shares will the company purchase because of the recapitalization?

$3,500$

$2,750$

$3,000$

$3,250$

taxes, EBIT, are projected to be $$25,000$ if economic conditions are normal. If there is strong

expansion in the economy, then EBIT will be $40\%$ higher. If there is a recession, then EBIT will be

$25\%$ lower. The company is considering a $$125,000$ debt issue with an interest rate of $8\%.$ The

proceeds will be used to repurchase shares of stock. There are currently $10,000$ shares

outstanding and no taxes.

Calculate the earnings per share in the recession scenario.