Peter Inc. has no debt outstanding and a total market value of $2,000,000. Earnings before interest and taxes, EBIT, are projected to be $350,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 18 percent higher. If there is a recession, then EBIT will be 20 percent lower. Peter Inc is considering a $600,000 debt issue with a 8 percent interest rate. The proceeds will be used to repurchase shares of stock. There are currently 50,000 shares outstanding. Peter Inc has a tax rate of 35 percent. Calculate earnings per share (EPS) under each of the three economic scenarios if the company goes ahead and issue debt for recapitalization purpose. Also calculate the percentage changes in EPS when the economy expands or enters a recession. Discuss your findings. 1. Calculate return on equity (ROE) under each of the three economic scenarios if the debt issued. Also calculate the percentage changes in ROE for economic expansion and recession, assuming with taxes. You are also required to discuss your findings. Input Area: Market Value $2,000,000 EBIT with Normal Economic Condition Change in EBIT with Expansion Change in EBIT with Recession Debt Issue under Consideration Interest on Debt # of Shares Outstanding Corporate Tax rate $350,000 2096 -1896 $600,000 896 50,000 3596 Output Area: Determining New EPS Under Recapitalization Recession Normal Expansion EBIT Interest Taxes NI EPS 964 in EPS Discuss your findings in the space provided below: Calculate return on equity (ROE) under each of the three economic scenarios if the debt issued. Also calculate the percentage changes in ROE for economic expansion and recession, assuming with taxes. You are also required to discuss your findings Output Area: ii With Recapitalization and with Corporate Taxes Recession Normal Expansion ROE % in ROE Discuss your findings in the space provided below