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Fujita, Incorporated, has no debt outstanding and a total market value of $ 3 3 2 , 1 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. 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. 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. 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. 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
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