Intro Zambezi Corp. expects EBIT to vary with the state of the economy as follows: State of economy EBIT in $ million) Boom 560 Base 125 Bust -200 Zambezi doesn't have any long-term debt and has 83 million shares outstanding, currently trading at $8.87. Because of political connections, it doesn't pay any taxes. IB Attempt 2/5 for 8 pts. Part 1 What are the expected earnings per share (EPS) during a boom? Correct Since the company doesn't have any debt, it doesn't pay interest. It also doesn't pay taxes. Therefore, EBIT and net income are the same in this case: Net income Number of shares outstanding = e = 6.75 560 IB- Attempt 1/5 for 10 pts. Part 2 What are the expected earnings per share (EPS) during a bust? Correct EPS = Net income Number of shares outstanding - 200 83 = -2.41 Part 3 1 - Attempt 1/5 for 10 pts. Zambezi now issues bonds worth $38 million to buy back some shares. How many shares are outstanding after the restructuring (in million)? Correct Since there are no taxes, the restructuring does not affect the share price. Given the stock price of $8.87, borrowing $38 million allows the firm to repurchase $38 million / $8.87 shares. The new number of shares outstanding is thus: 38 Nnew = 83 287 = 78.72 million) Part 4 IB Attempt 3/5 for 0 pts. The interest rate on the debt is 6%. What are the expected earnings per share (EPS) during a boom after the restructuring? 1+ decimals Submit IB - Attempt 1/5 for 10 pts. Part 5 What are the expected earnings per share (EPS) during a bust after the restructuring? 1+ decimals Submit