Fujita, Incorporated, has no debt outstanding and a total market value of $$382,500.$ Earnings before

interest and taxes, EBIT, are projected to be $$52,000$ if economic conditions are normal. If there is

strong expansion in the economy, then EBIT will be $14$ percent higher. If there is a recession, then

EBIT will be $23$ percent lower. The company is considering a $$180,000$ debt issue with an interest

rate of $7$ percent. The proceeds will be used to repurchase shares of stock. There are currently $8,500$

shares outstanding. The company has a tax rate of $25$ percent, a market$-$to$-$book ratio of $1\mathrm{.}0$ before

recapitalization, and the stock price changes according to MM$.$

$($a$)$ Calculate earnings per share $($EPS$)$ under each of the three economic scenarios before any debt

is issued.

$($b$)$ Calculate the percentage changes in EPS when the economy expands or enters a recession.

$($c$)$ Calculate earnings per share $($EPS$)$ under each of the three economic scenarios assuming the

company goes through with recapitalization.