Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please include excel formulas Fujita, Inc., has no debt autstanding and a tatal market value of $222,000. Earnings before interest and taxes, EBIT, are projected

image text in transcribed

Please include excel formulas

Fujita, Inc., has no debt autstanding and a tatal market value of $222,000. Earnings before interest and taxes, EBIT, are projected to be $18,000 if econamic canditions are narmal. If there is strong exparsion in the ecanomy, then EBIT will be 25 percent higher. If there is a recessian, then EBIT will be 30 percent lower. The company is cansidering a $60,000 debt issue with an interest rate of 7 percent. The proceeds will be used to repurchase shares of stock. There are currently 7,400 shares outstanding- Ignore taxes for this problern. a. Calculate earnings per share (EPS) under each of the three economic scenarios before any debt is issued. Alsa calculate the percentage changes in EPS when the ecanomy expands or enters a recession. b. Repeat part (a) assuming that the company goes through with recapitalization. input Area: \begin{tabular}{|lr|} \hline Market value & $222,000 \\ Eart & $18,000 \\ Exparsion EBIT & 25% \\ Recession EBIT & 30% \\ Debt issue & $60,000 \\ Interest rate & 7% \\ Shares dutstanding & 7,400 \\ \hline \end{tabular} (Use cells A.6 to B12 from the given information to complete this question.) Output Area

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions