$($FILL IN $$ALL THE MISSING PERCENTAGES$$ OR CREDIT MY QUESTION BACK!$)$

#$1.$ Fujita, Incorporated, has no debt outstanding and a total market value of $$222,000.$ Earnings before interest and taxes, EBIT, are projected to be $$18,000$ if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be $25$ percent higher. If there is a recession, then EBIT will be $30$ percent lower. The company is considering a $$60,000$ debt issue with an interest rate of $7$ percent. The proceeds will be used to repurchase shares of stock. There are currently $7,400$ shares outstanding. Ignore taxes for questions $($a$)$ and $($b$).$ Assume the company has a market$-$to$-$book ratio of $1\mathrm{.}0$ and the stock price remains constant.

a$-1.$ Calculate return on equity $($ROE$)$ under each of the three economic scenarios before any debt is issued. $($Do not round intermediate calculations and enter your answers as a percent rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

a$-2.$ Calculate the percentage changes in ROE when the economy expands or enters a recession. $($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$.,32\mathrm{.}16.)$

a$-1.$ Recession ROE $\_\_\_\_\_\%?$

a$-1.$ Normal ROE $\_\_\_\_\_\%?$

a$-1.$ Expansion ROE $\_\_\_\_\_\%?$

a$-2.$ Recession percentage change in ROE $\_\_\_\_\_\%?$

a$-2.$ Expansion percentage change in ROE $\_\_\_\_\_\%?$

Assume the firm goes through with the proposed recapitalization.

b$-1.$ Calculate the return on equity $($ROE$)$ under each of the three economic scenarios. $($Do not round intermediate calculations and enter your answers as a percent rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

b$-2.$ Calculate the percentage changes in ROE when the economy expands or enters a recession. $($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$.,32\mathrm{.}16.)$

b$-1.$ Recession ROE $\_\_\_\_\_\%?$

b$-1.$ Normal ROE $\_\_\_\_\_\%?$

b$-1.$ Expansion ROE $\_\_\_\_\_\%?$

b$-2.$ Recession percentage change in ROE $\_\_\_\_\_\%?$

b$-2.$ Expansion percentage change in ROE $\_\_\_\_\_\%?$

Assume the firm has a tax rate of $21$ percent.

c$-1.$ Calculate return on equity $($ROE$)$ under each of the three economic scenarios before any debt is issued. $($Do not round intermediate calculations and enter your answers as a percent rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

c$-2.$ Calculate the percentage changes in ROE when the economy expands or enters a recession. $($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$.,32\mathrm{.}16.)$

c$-3.$ Calculate the return on equity $($ROE$)$ under each of the three economic scenarios assuming the firm goes through with the recapitalization. $($Do not round intermediate calculations and enter your answers as a percent rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

c$-4.$ Given the recapitalization, calculate the percentage changes in ROE when the economy expands or enters a recession. $($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$.,32\mathrm{.}16.)$

c$-1.$ Recession ROE $\_\_\_\_\_\%?$

c$-1.$ Normal ROE $\_\_\_\_\_\%?$

c$-1.$ Expansion ROE $\_\_\_\_\_\%?$

c$-2.$ Recession percentage change in ROE $\_\_\_\_\_\%?$

c$-2.$ Expansion percentage change in ROE $\_\_\_\_\_\%?$

c$-3.$ Recession ROE $\_\_\_\_\_\%?$

c$-3.$ Normal ROE $\_\_\_\_\_\%?$

c$-3.$ Expansion ROE $\_\_\_\_\_\%?$

c$-4.$ Recession percentage change in ROE $\_\_\_\_\_\%?$

c$-4.$ Expansion percentage change in ROE $\_\_\_\_\_\%?$