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c) Teme Berhad has no debt outstanding and a total market value of RM136,000. Earnings before interest and taxes, EBIT, are projected to be RM12,000
c) Teme Berhad has no debt outstanding and a total market value of RM136,000. Earnings before interest and taxes, EBIT, are projected to be RM12,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 27 percent higher. If there is a recession, then EBIT will be 55 percent lower. Teme Berhad is considering a RM54.000 debt issue with a 5 percent interest rate. The proceeds will be used to repurchase shares of stock. There are currently 2,000 shares outstanding and with 35 percent corporate taxes. Required: Calculate the earnings per share (EPS) under each of these economic scenarios assuming that the company goes through with recapitalization
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