Weber Inc. has no debt outstanding and a total market value of $100,000. Earnings before interest and taxes, EBIT, are projected to be $19,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 20 percent higher. If there is recession, then EBIT will be 50 percent lower. Weber Inc. is considering a $36,000 debt issue with a 6 percent interest rate. The proceeds will be used to repurchase shares of stock. There are currently 28,000 shares outstanding. The company has a market-to-book ratio of 1.0.

Note: Please make sure your answers are accurate to 2 decimal places.

a) Calculate ROE (as a percentage), and percent change in ROE for the all equity firm with no taxes for each economic scenario

.Expansion Normal Recession

b) Calculate ROE (as a percentage), and percent change in ROE for the recapitalized firm with no taxes for each economic scenario.

Expansion Normal Recession

c) Calculate ROE (as a percentage), and percent change in ROE for the all equity firm with taxes of 35% for each economic scenario.

Expansion Normal Recession

d) Calculate ROE (as a percentage), and percent change in ROE for the recapitalized firm with taxes of 35% for each economic scenario.

Expansion Normal Recession