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Fujita, Incorporated, has no debt outstanding and a total market value of $ 2 5 1 , 6 0 0 . Earnings before interest and
Fujita, Incorporated, has no debt outstanding and a total market value of $ Earnings before interest and taxes, EBIT, are projected to be $ if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be percent higher. If there is a recession, then EBIT will be percent lower. The company is considering a $ debt issue with an interest rate of percent. The proceeds will be used to repurchase shares of stock. There are currently shares outstanding. The company has a tax rate of percent, a markettobook ratio of and the stock price remains constant.
a 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 decimal places, eg
a 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 decimal places, eg
b 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 decimal places, eg
b 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 decimal places, eg
tablea Recession EPS,,Normal EPS,,Expansion EPS,,a Recession percentage change in EPS,,
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