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Minion, Inc., has no debt outstanding and a total market value of $211,875. Earnings before interest and taxes, EBIT, are projected to be $14,300 if
Minion, Inc., has no debt outstanding and a total market value of $211,875. Earnings before interest and taxes, EBIT, are projected to be $14,300 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 20 percent higher. If there is a recession, then EBIT will be 35 percent lower. The company is considering a $33,900 debt issue with an interest rate of 6 percent. The proceeds will be used to repurchase shares of stock. There are currently 7,500 shares outstanding. Ignore taxes for this problem. Calculate earnings per share, EPS, under each of the three economic scenarios after the recapitalization. Recession EPS is $1.15 Normal EPS is $1.95 Expansion EPS is $2.40 (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
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