RAK, Inc., has no debt outstanding and a total market value of $200,000. Earnings before interest and taxes, EBIT, are projected to be $24,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 15 percent higher. If there is a recession, then EBIT will be 30 percent lower. RAK is considering a $70,000 debt issue with an interest rate of 7 percent. The proceeds will be used to repurchase shares of stock. There are currently 8,000 shares outstanding. Ignore taxes for this problem.

1) Calculate earnings per share (EPS) under each of the three economic scenarios before any debt is issued.

	EPS
Recession	$
Normal	$
Expansion	$

2) Calculate the percentage changes in EPS when the economy expands or enters a recession.

I figured out these answers which were

Percentage changes in EPS
Recession	-30%
Expansion	15%

3) Calculate earnings per share (EPS) under each of the three economic scenarios assuming the company goes through with recapitalization.

	EPS
Recession	$
Normal	$
Expansion	$

4)Given the recapitalization, calculate the percentage changes in EPS when the economy expands or enters a recession.

I figured out this answer as well it is:

Percentage changes in EPS
Recession	-37.71%
Expansion	18.86%