River Cruises is all-equity-financed.

Current Data

Number of shares 100,000

Price per share $10

Market value of shares $1,000,000

Outcomes

State of the Economy

Slump Normal. Boom.

Profits before interest $79,000 $133,000 $194,500

Suppose it now issues $250,000 of debt at an interest rate of 10% and uses the proceeds to repurchase 25,000 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 2 decimal places.)

River Cruises is all-equity-financed.

Current DataNumber of shares100,000Price per share$10Market value of shares$1,000,000OutcomesState of the EconomySlumpNormalBoomProfits before interest$79,000$133,000$194,500

Suppose it now issues $250,000 of debt at an interest rate of 10% and uses the proceeds to repurchase 25,000 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 2 decimal places.)

River Cruises is all-equity-financed.

Current DataNumber of shares100,000Price per share$10Market value of shares$1,000,000OutcomesState of the EconomySlumpNormalBoomProfits before interest$79,000$133,000$194,500

Suppose it now issues $250,000 of debt at an interest rate of 10% and uses the proceeds to repurchase 25,000 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 2 decimal places.)

Data

Number of shares: ?

Price per share: $10

Market value of shares: ?

Market value of debt: ?

Outcomes

State of the Economy

Slump Normal. Boom

Profits before interest earner $79,000 $133,000 $194,500

Interest ? ? ?

Equity earnings ? ? ?

Earnings per share ? ? ?

Return on shares ? ? ?