Fujita, Incorporated, has no debt outstanding and a total market value of $$222,000.$Dickson Corporation is comparing two different capital structures. Plan I would result in

$12,700$ shares of stock and $$100,050$ in debt. Plan II would result in $9,800$ shares of

stock and $$226,200$ in debt. The interest rate on the debt is $10$ percent.

a$.$ Ignoring taxes, compare both of these plans to an all$-$equity plan assuming that EBIT

will be $$70,000.$ The all$-$equity plan would result in $15,000$ shares of stock

outstanding. What is the EPS for each of these plans? $($Do not round intermediate

calculations and round your answers to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

b$.$ In part $($a$),$ what are the break$-$even levels of EBIT for each plan as compared to that

for an all$-$equity plan? $($Do not round intermediate calculations.$)$

c$.$ Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and II$?($Do not

round intermediate calculations.$)$

d$-1.$ Assuming that the corporate tax rate is $21$ percent, what is the EPS of the firm? $($Do

not round intermediate calculations and round your answers to $2$ decimal places,

e$.$g$.,32\mathrm{.}16.)$

d$-2.$ Assuming that the corporate tax rate is $21$ percent, what are the break$-$even levels

of EBIT for each plan as compared to that for an all$-$equity plan? $($Do not round

intermediate calculations.$)$

d$-3.$ Assuming that the corporate tax rate is $21$ percent, when will EPS be identical for

Plans I and II$?($Do not round intermediate calculations.$)$

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.

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$-1.$ Calculate earnings per share $($EPS$)$ under each of the three economic scenarios

before any debt is issued. $($Do not round intermediate calculations and round

your answers to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

a$-2.$ Calculate the percentage changes in EPS 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$-1.$ Calculate earnings per share $($EPS$)$ under each of the three economic scenarios

assuming the company goes through with recapitalization. $($Do not round

intermediate calculations and round your answers to $2$ decimal places, e$.$g$.,$

$32\mathrm{.}16.)$

b$-2.$ Given the recapitalization, calculate the percentage changes in EPS 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$.,32\mathrm{.}16.)$