Problem 14-2 EBIT, Taxes, and Leverage Castle, Inc, has no debt outstanding and a total market value of $200,000. Earnings before interest and taxes, EBIT, are projected to be $30,000 economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 18 percent higher there is a recession, then EBIT will be 20 percent lower. The firm is considering a debt issue of $75,000 with an interest rate of 8 percent The proceeds will be used to repurchase shares of stock. There are currently 8,000 shares outstanding. The firm has a tax rate 35 percent. Assume the stock price remains constant 10 points Spped1 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. 3216.) Recession Normal Print a-2. Calculate the percentage changes in EPS when the economy expands or enters a recession. (A negative answer should be number, e.g.32.) indicated by a minus sign. Do not round intermediate calculetions. Enter your answers as a percent rounded to the nearest whole References Recession Expansior b-1. Calculate arnings per share (EPS) under each of the three economic scenarios assuming the company goes through with recapitalization. (Do not round intermediste calculations and round your answers to 2 decimal places, e.g. 3216) Recession Normal Expansion Piex 1 of 8Next>