An unlevered firm with 5M shares of common stock outstanding has a market value of $800M. It generates annual EBIT of $100M under normal economicconditions, which occur with 50% probability; $60M during economicrecessions, which occur with 20% probability; and $160Mduring economic expansions. The firm plans to borrow$400M at 8% annual interest to retire equity.It pays a 25% corporate income tax. (A)What effect do you expect this recapitalization to have on the firms operating performance and financial performance? (Support your answer with actual numbers, that is calculate the current expectation and standard deviation of EBIT and EPS and compare to what you expectthem to be after the recapitalization.)(B)For what value(s)of EBIT would this recapitalization have no effect, a positive effect, and a negative effect, respectively, on expected EPS?