Fujita, Inc., 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 $2$ stock. There are currently $7,400$ shares outstanding. Assume the company has a tax rate of $21$ percent, a market$-$to$-$book ratio of $1\mathrm{.}0,$ and the stock price remains constant.

a$.$ Calculate earnings per share $($EPS$)$ under each of the three economic scenarios before any debt is issued. Also calculate the percentage changes in EPS when the economy expands or enters a recession.

b$.$ Repeat part $($a$)$ assuming that the company goes through with recapitalization.

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