Q3 P1

(dont bother answering this question if the answers going to be incorrect)

Fujita, Incorporated, has no debt oustanding and a total market value of $382,500 Earnings before interest and taves, EBIT, are projected to be $52,000 if economic conditions are noemal, If there is strong expansion in the economy, then EBIT will be 14 percent higher, If there is a recessiton, then EArT will be 23 percent lower. The company is considering a $190,000 debt issue with an interest rate of 7 percent. The proceeds will be used to repurchase shares of stock. There are currently 8,500 shares outstonding. Ignore taxes for questions (0) and (o) Assume the company has a market. to-book ratio of 1,0 and the stock price remeins constant. a-1. Calculate return on equity ROC ) under each of the three economic scenarios before any debt is issued. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16 .) a-2. Caiculate the percentage changes in ROE 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.9, 32.16. b-1. Assume the firm goes through with the proposed recapitalization. Calculate the return on equity (ROQ) under each of the three econsmic scenarios. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.9. 32.16 .3 b-2. Assume the firm goes through with the proposed recapitafication. Calculate the percentage changes in ROE 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.] Assume the Grm has a tar rate of 25 percent. any debt is issued. poo not round intermediate calcalations and entar your answers as a percent rounded to 2 decimal slaces, 4.9 .32 .15 .) 6.2. Calculate the percentage changes in foE inhen the ectenomy expancs or anters a intermediate celculations and enter your antees as a pencent raunded to 2 decimal places, e.e. 32.16 ] intermediate calculations and enter your antaness as a pescent rocinded to 2 decimal places, eg-32.16.] c-4. Given the recapitaliation, cilculate the percentage changes in Roci atien the economy expandi or enters a recension (A negative ansiner should be indicated by a minus sign. Do not roved intermediah calcilations and enter rove answers as a percent reunded to 2 decimal places. e 4- 32.55 )