Calculate earnings per share under each of three economic

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Money, Inc., has no debt outstanding and a total market value of $150,000. Earnings before interest and taxes, EBIT, are projected to be $36,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 15 percent higher. If there is a recession, then EBIT will be 25 percent lower. Money is considering a $95,000 debt issue with an interest rate of 8 percent. The proceeds will be used to repurchase shares of stock. There are currently 6,000 shares outstanding. Ignore taxes for this problem. a-1. Calculate earnings per share, EPS, under each of the three economic scenarios before any debt is issued. a-2. Calculate the percentage changes in EPS when the economy expands or enters a recession. b-1. Calculate earnings per share (EPS) under each of the three economic scenarios assuming the company goes through with recapitalization b-2. Given the recapitalization, calculate the percentage changes in EPS when the economy expands or enters a recession

Reference no: EM131189274

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