HERE IS A SAMPLE SOLUTION WITH DIFFERENT VALUES, BE VERY CAREFUL MAKE SURE YOU USE THE VALUES FOR THIS QUESTION IN THE ABOVE WORKING, WILL UPVOTE FOR CORRECT ANSWERS.

Full solution: We are are told perfect capital markets, which means no taxes or bankruptcy costs. Before issuing the debt: There are 9.3 million share outstanding Normal : Ebit \\( =\\$ 20.98 \\) millions, therefore EPS \\( = \\) Ebit/No. of shares \\( =20.98 \\) / \\( 9.3=\\$ 2.256 / \\) share Boom : Ebit \\( =\\$ 24.127 \\) millions, therefore EPS \\( = \\) Ebit/No. of shares \\( =24.127 / \\) \\( 9.3=\\$ 2.594 / \\) share Recession: Ebit \\( =\\$ 15.735 \\) millions, therefore EPS \\( = \\) Ebit/No. of shares \\( =15.735 / \\) \\( 9.3=\\$ 1.692 / \\) share Compared to the normal economic state, the Boom has \15.0 increase in EPS Compared to the normal economic state, the Recession has \25.0 decrease in EPS After issuing the debt: Debt of \\( \\$ 85.1 \\) million is issued when the econonic conditions were normal and shares are repurchased with the proceeds of the issue. The shares are repurchased at \\( \\$ 21.9 \\) per share = Total market value of shares / shares outstanding \\( =\\$ 203.67 \\) million \\( / 9.3 \\) shares outstanding. The number of shares repurchased is 3.88584474886 shares \\( =\\$ 85.1 \\) millions \\( / \\) \\( \\$ 21.9 \\) per share. Hence the remaining shares outstanding becomes 5.41415525114 shares \\( =9.3 \\) \\( -3.88584474886=5.41415525114 \\) Normal : \\( : \\) EBIT \\( =\\$ 20.98 \\) millions, Interest \\( =4.7656=85.1 * 0.056 \\), hence \\( \\mathrm{EBT} \\equiv \\) 16.2144 therefore EPS \\( = \\) EBT/No. of shares \\( =16.2144 / 5.41415525114=\\$ 2.995 / \\) share Boom : EBIT \\( =\\$ 24.127 \\) millions, Interest \\( =4.7656 \\) (this is fixed), hence \\( E B T= \\) 19.3614 therefore EPS \\( = \\) EBT \\( / \\) No of shares \\( =19.3614 / 5.41415525114=\\$ 3.576 / \\) share Recession: EBIT \\( =\\$ 15.735 \\) millions, Interest \\( =4.7656 \\) (this is fixed), hence \\( E B T= \\) 10.9694 therefore EPS \\( = \\) EBT \\( / \\) No. of shares \\( =10.9694 / 5.41415525114=\\$ 2.026 / \\) share Compared to the normal economic state, the Boom has \19.409 increase in EPS Compared to the normal economic state, the Recession has \32.348 decrease in EPS Answer key: Before the Recap ta 1 : \\( \\$ 1.692 \\) ta \\( : \\$ 2.256 \\) ta3 : \\( \\$ 2.594 \\) ta \:15.000 (same as \\% change in EBIT) ta : \25.000 (same as \\% change in EBIT) After the Recap ta6: \\( \\$ 2.026 \\) ta7 : \\( \\$ 2.995 \\) ta : \\( \\$ 3.576 \\) ta9 : \19.409 (larger \\% change than EBIT) ta10: \32.348 (larger \\% change than EBIT) A correct answer is 1.692 , which can be typed in as follows: 1.692 A correct answer is 2.256 , which can be typed in as follows: 2.256 A correct answer is 2.594 , which can be typed in as follows: 2.594 A correct answer is 15.0 , which can be typed in as follows: 15.0 A correct answer is 25.0 , which can be typed in as follows: 25.0 A correct answer is 2.026 , which can be typed in as follows: 2.026 A correct answer is 2.995 , which can be typed in as follows: 2.995 A correct answer is 3.576 , which can be typed in as follows: 3.576 A correct answer is 19.409 , which can be typed in as follows: 19.409 A correct answer is 32.348 , which can be typed in as follows: 32.348 The Sandwich With A Pretty Big Pickle In It Corporation exists in a world of perfect capital markets with no market imperfections (such as corporate taxes or costs of financial distress). The firm has zero debt outstanding and its 9.6000 million ordinary shares currently trade for a total market value of \\( \\$ 235.2000 \\) million. The firm projects that their EBIT (Earnings Before Interest and Taxes) will be \\( \\$ 19.2900 \\) million each year if economic conditions are normal. They also estimate that if the economy experiences a boom in growth that their EBIT will be \25.0 higher. Similarly, they forecast that if there is a recession, then their EBIT will shrink by \35.0. The Sandwich With A Pretty Big Pickle In It Corporation is considering a undertaking a leveraged recapitalization, which would consist of issuing \\( \\$ 120.90 \\) million worth of new debt at par and using the proceeds from the sale to repurchase ordinary shares from investors. The debt would cost the firm an interest rate of \3.60 per annum. You are encouraged to do no rounding in your intermediate calculations. Only round the final answers that you input as specified by the questions. A) Using the above information, calculate the EPS (i.e. Earnings Per Share) of The Sandwich With A Pretty Big Pickle In It Corporation under each of the three economic states prior to issuing the debt. Round each of your answers to 3 decimal places. Use the unrounded versions of your above answers to answer the following two questions: Compared to the normal economic state, how much larger (as a percentage) is the firm's EPS under the BOOM economic state? \\% (Round your answer to 3 decimal places) Compared to the normal economic state, how much smaller (as a percentage) is the firm's EPS under the RECESSION economic state? \\% (Round your answer to 3 decimal places. No minus sign is needed) B) Now assume that the firm has borrowed the funds and completed the share repurchase. Recalculate the firm's EPS under each of the economic scenarios. Round each of your answers to 3 decimal places. Use the unrounded versions of your above answers to answer the following two questions: Compared to the normal economic state, how much larger (as a percentage) is the firm's EPS under the BOOM economic state now that it has completed the leveraged recapitalisation? \\% (Round your answer to 3 decimal places) Compared to the normal economic state, how much smaller (as a percentage) is the firm's EPS under the RECESSION economic state now that it has completed the leveraged recapitalisation? \ (Round your answer to 3 decimal places. No minus sign is needed