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Can someone assist me with the following question? Thanks very much Charny Inc. has no debt outstanding and a total market value of $165,000. Earnings
Can someone assist me with the following question? Thanks very much
Charny Inc. has no debt outstanding and a total market value of $165,000. Earnings before interest and taxes, EBIT, are projected to be $21,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 20% higher. If there is a recession, then EBIT will be 25% lower. Charny is considering a $60,000 debt issue with a 7% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 5,500 shares outstanding. Ignore taxes for this problem. a-1. Calculate earnings per share (EPS) under each of the three economic scenarios before any debt is issued. (Round the final answers to 2 decimal places. Omit $ sign in your response.) b-1. Calculate earnings per share (EPS) under each of the three economic scenarios assuming the company goes through with recapitalization. (Round the final answers to 2 decimal places. Omit $ sign in your response.)Step by Step Solution
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