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, assuming no taxes.

Note: 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 for economic expansion or recession, assuming no taxes.

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 the nearest whole number, e$.$g$.,32.$

b$-1.$ Calculate return on equity, ROE, under each of the three economic scenarios after the recapitalization.

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$.,32\mathrm{.}16.$

b$-2.$ Calculate the percentage changes in ROE for economic expansion and recession after the recapitalization.

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$.,32\mathrm{.}16.$