eBook Print eferences Fujita, Incorporated, has no debt outstanding and a total market value of $251,600. Earnings before interest and taxes, EBIT, are projected to be $41,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 15 percent higher. If there is a recession, then EBIT will be 26 percent lower. The company is considering a $135,000 debt issue with an interest rate of 8 percent. The proceeds will be used to repurchase shares of stock. There are currently 7,400 shares outstanding. The company has a tax rate of 24 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.g., 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.g., 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.g., 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. a-1. Recession EPS Normal EPS Expansion EPS a-2. Recession percentage change in EPS Expansion percentage change in EPS b-1. Recession EPS Normal EPS b-2. Expansion EPS Recession percentage change in EPS Expansion percentage change in EPS $ $ $ $ $ $ (30.00) (25.00) 18.74 -26.00 % 15.00 % 16.76 25.90 31.17 -35.30% 20.36%

Fujta, incorpolated, has no debt outstanding and a total market volue of $251,600. Earnings before interest and taxis. EBIT, are projected to be $41000 if economic conditions are normal If there is strong expansion in the economy, then EBIT will be 15 percent higher it there is a recession, then EBIT will be 26 percent lower The company is considering a $135,000 debt issue with an interest rate of 8 percent. The proceeds will be used to repurchase shares of stock. There ore currently 7,400 shares outstanding. The company has a tax rete of 24 percent, a motket to book ratio of 1.0 , and the stock price remairis constant. Q.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., 32.16 . B-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.g 32.16 b-1. Calculate eamings per share, EPS, under each of the three economic scenarios assurning the company goes through with recapitalization Note: Do not round intermediate caiculations and round your answers to 2 decimal places, e.9. 32.16. b-2. Gmen the recapialization, calculate the percentage changes in EPS when the economy expands or enter5 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