Fujlta, Incorporated, has no debt outstanding and a total market value of $$230,400.$

Earnings before Interest and taxes, EBIT, are projected to be $$39,000$ if economic

conditions are normal. If there is strong expansion in the economy, then EBIT will be $13$

percent higher. If there is a recession, then EBIT will be $24$ percent lower. The

company is considering a $$125,000$ debt issue with an interest rate of $6$ percent. The

proceeds will be used to repurchase shares of stock. There are currently $7,200$ shares

outstanding. The company has a tax rate of $22$ percent, a market$-$to$-$book ratio of $1\mathrm{.}0$

before recapitalization, and the stock price changes according to M&M$.$

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

before any debt is issued. $($Do not round Intermedlate 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 Indlcated by a minus sign. Do not round

Intermedlate 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

Intermedlate calculatlons and round your answers to $2$ declmal 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 negatlve answer should be Indicated

by a minus sign. Do not round Intermedlate calculations and enter your answers

as a percent rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

Answer is complete but not entirely correct.