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Please help. Please help with all parts. i will vote accordingly. thanks in advanced. Sunrise, Inc., has no debt outstanding and a total market value
Please help. Please help with all parts. i will vote accordingly. thanks in advanced.
Sunrise, Inc., has no debt outstanding and a total market value of $245,000. Earnings before interest and taxes, EBIT, are projected to be $19,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 25 percent higher. If there is a recession, then EBIT will be 40 percent lower. The company is considering a $58,800 debt issue with an interest rate of 8 percent. The proceeds will be used to repurchase shares of stock. There are currently 5,000 shares outstanding. The company has a tax rate of 21 percent and the stock price remains constant 0-1. 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 Intermedlate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) % % a-1. Recession EPS Normal EPS Expansion EPS a-2. Recession percentage change in EPS Expansion percentage change in EPS b-1. Recession EPS Normal EPS Expansion EPS b-2. Recession percentage change in EPS Expansion percentage change in EPS 96 % Step by Step Solution
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