River Cruises is all-equity-financed.

Current Data

Number of Shares 100,000

Price per share $10

Market value of shares $1,000,000

State of the Economy

Slump Normal Boom

Profits Before Interest $80,5000 $136,000 $197,500

Suppose it now issues $250,000 of debt at an interest rate of 10% and uses the proceeds to repurchase 250,000 shares. Assume that the firm pays no taxes and that debt finance has no impact on firm value. Refer to the above table to compute the missing data. (Do not round intermediate calculations. Round "Earnings per share" to 3 decimal places. Enter "Return on shares" as a percent rounded to two decimal places"

Outcomes

Number of Shares _____________

Price Per Share _____________

Market Value of Shares____________

Market Value of Debt______________

State of the Economy

Slump Normal Boom

Profits Before Interest $80,500 $136,000 $197,000

Interest _________ ___________ ____________

Equity Earnings _________ ___________ ____________

Earnings Per Share _________ ___________ ____________

Return on Shares ________% __________% ___________%