Question 1:

Question 2:

Ghost, Inc., has no debt outstanding and a total market value of $180,000. Earnings before Interest and taxes, EBIT, are projected to be $25,000 If economic conditions are normal. If there is strong expansion In the economy, then EBIT will be 10 percent higher If there Is a recession, then EBIT will be 20 percent lower. The company is consldering a $60,000 debt issue with an Interest rate of 5 percent. The proceeds ill be used to repurchase shares of stock. There are currently 6,000 shares outstanding. Ignore taxes for this problem. a-1. Calculate earnings per share (EPS) under each of the three economic scenarios before any debt Is Issued. (Do not round Intermedlate calculatlons and round your answers to 2 declmal places, e.g., 32.16.) a-2. Calculate the percentage changes In EPS when the economy expands or enters a recession. (A negatlve answer should be Indicated by a minus sign. Do not round Intermedlete calculetlons and enter your answers as a percent rounded to 2 declmal 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 recapltalization. (Do not round Intermedlete calculations and round your answers to 2 declmal places, e.g. 32.16.) b-2. Glven the recapitalization, calculate the percentage changes In EPS when the economy expands or enters a recession. (A negatlve answer should be Indicated by a minus sign. Do not round Intermedlate celculetlons and enter your answers as a percent rounded to 2 declmal places, e.g., 32.16.) a-1. Recession EPS 7.22 2.71 2.98 Normal EPS Expansion EPS a-2. Recession percentage change in EPS Expansion percentage change in EPS b-1. Recession EPS Normal EPS b-2. Expansion EPS Recession percentage change in EPS Expansion percentage change in EPS Thrice Corp. uses no debt. The weighted average cost of capital Is 8.8 percent. The current market value of the equity is $17.4 milllon and the corporate tax rate is 24 percent. What Is EBIT? (Do not round Intermedlate calculatlons. Enter your answer In dollers, not millons of dollers, rounded to 2 declmal places, e.g., 1,234,567.89.) EBIT