Fujita, Incorporated, has no debt outstanding and a total market value of $240,000. Earnings before interest and taxes, EBIT, are projected to be $26,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 18 percent higher. If there is a recession, then EBIT will be 20 percent lower. The company is considering a $150,000 debt issue with an interest rate of 8 percent. The proceeds will be used to repurchase shares of stock. There are currently 15,000 shares outstanding. Ignore taxes for this problem.

a-1. 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 2 decimal places, e.g., 32.16.

a-2. 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 2 decimal places, e.g., 32.16.

\begin{tabular}{|c|c|c|c|} \hline a-1. Recession EPS & $ & 1.73x & \\ \hline Normal EPS & $ & 2.05 & \\ \hline Expansion EPS & $ & 1.38 & \\ \hline a-2. Recession percentage change in EPS & & 20.23 & % \\ \hline Expansion percentage change in EPS & & 18.50x & % \\ \hline b-1. Recession EPS & $ & 1.56 & \\ \hline Normal EPS & $ & 2.49 & \\ \hline Expansion EPS & $ & 3.32 & \\ \hline b-2. Recession percentage change in EPS & & 37.35 & 1% \\ \hline Expansion percentage change in EPS & & 33.33 & \\ \hline \end{tabular}