Castle, Inc has no debt outstanding and a total market value of 220,000. Earnings before interest and taxes, EBIT, are projected to be $40,000 if economic conditions are normal.

Castle, Inc., has no debt outstanding and a total market value of $220,000. Earnings before interest and taxes, EBIT, are projecte be $40,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 10 percent higher. I is a recession, then EBIT will be 20 percent lower. The firm is considering a debt issue of $135,000 with an interest rate of 4 perc The proceeds will be used to repurchase shares of stock. There are currently 11,000 shares outstanding. Ignore taxes for this pro 6-1. Calculate earnings per share, EPS, under each of the three economic scenarios before any debt is issued. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 3216.) EPS 1.89 Recession Normal $ 2.36 Expansion $ 2.60 0-2. Calculate the percentage changes in EPS when the economy expands or enters a recession. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to the nearest whe number, e.g., 32.) Percentage changes in EPS Recession -20.00 Expansion 10.00 b-1. Calculate earnings per share (EPS) under each of the three economic scenarios assuming the company goes through with recapitalization. (Do not round intermediate calculations and round your answers to 2 decimal places, e... 32.16.) a-2. Calculate the percentage changes in EPS when the economy expands or enters a recession. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to the nearest number, e.g., 32) Percentage changes in EPS Recession -20.00 Expansion 10.00 b-1. Calculate earnings per share (EPS) under each of the three economic scenarios assuming the company goes through with recapitalization. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) $ Recession Normal Expansion EPS 4.07 5.29 5.90 0 $ $ b-2. Given the recapitalization, calculate the percentage changes in EPS when the economy expands or enters a recession. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Percentage changes in EPS Recession -23.12 Expansion 11.56