AutoSave Home Insert Draw Page Layout Formulas Data Cut Aptos Narrow (Bod... v 12 ' Copy Paste B I U v Format Book1 AutoSum Fill v Clear Sort & Filter Find & Sensitivity Add-ins Select Analyze Data T U V W X Y Review View Automate Wrap Text General Normal Bad Good Neutral Calculation Merge & Center $ % 9 Conditional Format Formatting as Table Check Cell Explanatory T... Input Linked Cell Note Insert Delete Format F G H | J K L M N P Q R AJ23 Open recovered workbooks? Your recent changes were saved. Do you want to continue working where you left off? fx A 29 30 31 32 36 37 38 39 40 41 42 34 35 33333 7 7 7 7 4 4 4 4 4 455 43 44 45 46 47 48 49 50 51 52 53 B Question 2. (20 points) C D E XYZ Corp. is currently operating without any outstanding debt and possesses a total market value of $450,000. Under normal economic circumstances, the projected earnings before interest and taxes amount to $18,000. In the event of a robust economic expansion, EBIT is expected to increase by 22%, whereas in a recession, EBIT is anticipated to decrease by 35%. The company is contemplating issuing $67,500 in debt at an interest rate of 7.25%. The proceeds from this debt issuance will be utilized to repurchase shares of stock. At present, there are 7,400 shares outstanding. 1. Compute the return on equity under each of the three economic scenarios before any debt issuance. Additionally, calculate the percentage changes in return on equity when the economy expands or contracts. Tax implications are disregarded for this problem. 2. Recalculate part (1) assuming the company proceeds with the proposed recapitalization. 3. Compute the return on equity under each of the three economic scenarios before any debt issuance. Additionally, calculate the percentage changes in return on equity when the economy expands or contracts. Assume the tax rate is 22%. 4. Recalculate part (3) assuming the company proceeds with the proposed recapitalization. 5. What insights do you derive from the computation? Please provide detailed comments explaining your observations. Ready Sheet1 Accessibility: Good to go S N Search (Cmd + Ctrl + U) AA AB AC AD AE AF BD Comments Share Yes No AG AH AJ 66 + 100%