Ch 1-5) 0 15 2 Which one of the following is a working capital decision? F2 Multiple Choice O. O O O C #3 Should the firm borrow money for five or for ten years? How should the firm raise additional capital to functs expansion? What is the cost of debt financing? What debt-equity ratio is best suited to the firm? How much cash should the firm keen in reserve? 20 F3 $ 4 F4 % 5 0 ********** DI *a

Fujita, Incorporated, has no debt outstanding and a total market value of $408,900. Earnings before interest and taxes, EBrT, are projected to be $54,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 13 percent higher. If there is a recession, then EBiT will be 21 percent lower. The company is considering a $200,000 debt issue with an interest rate of 5 percent. The proceeds will be used to repurchase shares of stock. There are currently 8,700 shares outstanding. The company has a tax rate of 22 percent, a market-to-book ratio of 1.0 , and the stock price remains constant. a-1. Calculate earnings per share, EPS, under each of the three economic scenarios before any debt is issued. Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.9.4, 32.16 . a-2. Calculate the percentage changes in EPS when the economy expands or enters a recession. Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.9., 32.16. b-1. Calculate earnings per share, EPS, under each of the three economic scenarios assuming the company goes through with recapitalization. Note: Do not round intermediate calculations and round your answers to 2 decimal places, e,9., 32.16 . b-2. Given the recapitalization, calculate the percentage changes in EPS when the economy expands or enters a recession. Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. b-1. Calculate earnings per share, EPS, under each of the three econo recapitalization. Note: Do not round intermediate calculations and round your answe b-2. Given the recapitalization, calculate the percentage changes in EF Note: A negative answer should be indicated by a minus sign. Do no percent rounded to 2 decimal places, e.g., 32.16