Oxford Inc. has no debt outstanding and a total market value of $270,000. Earnings before interest and taxes, EBIT, are projected to be $50,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 25% higher. If there is a recession, then EBIT will be 30% lower. The company is considering a $90,000 debt issue with an interest rate of 7%. The proceeds will be used to repurchase shares of stock. There are currently 6,000 shares outstanding. Assume the company has a market-to-book ratio of 1.0. The tax rate is 35% and is included to calculate net income.

Assume that you are working for this company and your boss asks you to do the analysis that is left by your colleague due to some reasons. You need to complete the work and analyze the EPS and ROE under both capital structures. The work done by your colleague is given below:

Current capital Structure (No Debt)
	Recession		Normal		Expansion
EBIT	$ 35,000		$ 50,000		$ 62,500
Interest
Taxable Income	$ 35,000		$ 50,000		$ 62,500
Taxes (35%)	$ 12,250		$ 17,500		$ 21,875
Net Income	$ 22,750		$ 32,500		$ 40,625
EPS	?		?		?
ROE	?		?		?
Proposed Capital Structure (With Debt)
EBIT		$ 35,000		$ 50,000		$ 62,500
Interest		$ 6,300		$ 6,300		$ 6,300
Taxable Income		$ 28,700		$ 43,700		$ 56,200
Taxes (35%)		$ 10,045		$ 15,295		$ 19,670
Net Income		$ 18,655		$ 28,405		$ 36,530
EPS		?		?		?
ROE		?		?		?