Wing Air, Inc. has no debt outstanding and a total market value of $250,000. Earnings before interest and taxes (EBIT) are projected to be $25,000 if economic conditions are normal. If the economy is strong then EBIT will be 20% percent higher. In the event of a recession, EBIT will be 35% percent lower. Wing Air is considering a $96,000 debt issue with an interest rate of 6% percent. The proceeds of which will be used to repurchase shares of stock. There are currently 6,000 shares outstanding.

Market value$250,000

EBIT $25,000

Expansion- EBIT 20%

Recession- EBIT 35%

Debt issue $96,000

Interest rate 6%

Shares outstanding6,000

Tax Rate 30%