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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

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 $ 73,000 121,000 182,500

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.)

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 73,000 121,000 182,500
Interest
Equity earnings
Earnings per share
Return on shares % % %
Expected Outcome

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