Money, Inc., has no debt outstanding and a total market value of $148,000. Earnings before interest and taxes, EBIT, are projected to be $13,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 30 percent higher. If there is a recession, then EBIT will be 59 percent lower. Money is considering a $59,000 debt issue with a 7 percent interest rate. The proceeds will be used to repurchase shares of stock. There are currently 2,000 shares outstanding. Money has a tax rate of 32 percent.
a. Earnings per share, EPS, for the recession, normal, and expansion scenarios before any debt is issued are $______, $______, and $_______, respectively (Round answers to 2 decimal places). When the company expands or enters a recession, EPS will change by_______% or _________%, respectively. (Input answers as a percent rounded to 2 decimal places, without the percent sign.)
b. Now assume that Money goes through with recapitalization. Earnings per share, EPS, for the recession, normal, and expansion scenarios are $_______, $______, and $________, respectively (Round answers to 2 decimal places). When the company expands or enters a recession, EPS will change by______% or _________%, respectively.
This question was answered on: Sep 16, 2020
Need a similar solution fast, written anew from scratch? Place your own custom order
We have top-notch tutors who can help you with your essay at a reasonable cost and then you can simply use that essay as a template to build your own arguments. This we believe is a better way of understanding a problem and makes use of the efficiency of time of the student. New solution orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.