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Minion, Inc., has no debt outstanding and a total market value of $230,400. Earnings before interest and taxes, EBIT, are projected be $39,000 if economic

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Minion, Inc., has no debt outstanding and a total market value of $230,400. Earnings before interest and taxes, EBIT, are projected 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 1.0, and the stock price remains constant. a-1. Calculate earnings per share (EPS) under each of the three economic scenarios before any debt is issued. (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. (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.) b-1. Calculate earnings per share (EPS) under each of the three economic scenarios assuming the company goes through with recapitalization. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b-2. Given the recapitalization, calculate the percentage changes in EPS when the economy expands or enters a recession. (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..., 32.16.) Answer is complete but not entirely correct. &- 1. Recession EPS $ 12.86 % $ $ 16.93 x 19.13 & - 2. Normal EPS Expansion EPS Recession percentage change in EPS Expansion percentage change in EPS Recession EPS %% -24.00 13.00 %% b- 1. $ 21.01 X Normal EPS $ 29.89 x b- 2. $ 34.70 Expansion EPS Recession percentage change in EPS Expansion percentage change in EPS -29.71% 16.10%

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