Saved Ghost, Inc., has no debt outstanding and a total market value of $273,600. Earnings before interest and taxes, EBIT, are projected to be $43,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 17 percent higher. If there is a recession, then EBIT will be 28 percent lower. The company is considering a $145,000 debt issue with an interest rate of 6 percent. The proceeds will be used to repurchase shares of stock. There are currently 7,600 shares outstanding. The company has a tax rate of 21 percent, a market-to-book ratio of 10, and the stock price remains constant. 0-1. Calculate earnings per share (EPS) under each of the three economic scenarios before any debt is issued. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) a-2. Calculate the percentage changes in EPS when the economy expands or enters a recession. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Calculate earnings per share (EPS) under each of the three economic scenarios assuming the company goes through with recapitalization. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g.. 32.16.) b-2. Given the recapitalization calculate the percentage changes in EPS when the economy expands or enters a recession. (A negative answer should be indicated by a minus sign. Do not found intermediate calculations and enter your answers as o percent rounded to 2 decimal pieces, e... 32.16.) Recession EPS Normal EPS Expansion EPS 2. Recession percentage change in EPS Expansion percentage change in EPS Prev 11 of 15 intermediate calculations and enter your answers as a percer decimal places, e.g., 32.16.) b-1. Calculate earnings per share (EPS) under each of the three ecor assuming the company goes through with recapitalization. (Dor intermediate calculations and round your answers to 2 decime 32.16.) b-2. Given the recapitalization, calculate the percentage changes in E economy expands or enters a recession. (A negative answer she by a minus sign. Do not round intermediate calculations and er as a percent rounded to 2 decimal places, e.g., 32.16.) a 1. Recession EPS Normal EPS Expansion EPS a-2. Recession percentage change in EPS Expansion percentage change in EPS b.1. Recession EPS Normal EPS 6.2 Expansion EPS Recession percentage change in EPS Expansion percentage change in EPS ere to search
