Question 26 2.78 pts Ornaments, Inc., is an all-equity firm with a total market value of $509,000 and 17,400 shares of stock outstanding. Management believes the earnings before interest and taxes (EBIT) will be $71,300 if the economy is normal. If there is a recession, EBIT will be 30 percent lower, and if there is a boom, EBIT will be 40 percent higher. The tax rate is 35 percent. What is the EPS in a recession? $1.60 $3.73 $3.46 $1.86 $2.66 Question 27 2.78 pts Kelso Electric is an all-equity firm with 41,750 shares of stock outstanding. The company is considering the issue of $285,000 in debt at an interest rate of 7 percent and using the proceeds to repurchase stock. Under the new capital structure, there would be 25,500 shares of stock outstanding. Ignore taxes. What is the break-even EBIT between the two plans? $51,256 $35,219 $31,306 $55,528 $43,934