Question $1.(20$ points$)$ EBIT and Leverage $[$LO$1]$ Ghost, Inc., has no debt outstanding and a total

marketvalue of $$185,000.$ Earnings before interest and taxes, EBIT, are projected to be $$29,000$ if

economic conditions are normal. If there is strong expansion in the economy, then EBIT will be $30$

percent higher. If there is a recession, then EBIT will be $40$ percent lower. The company is considering

a $$65,000$ 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 problem.