Business, 14.12.2019 04:31 annette211pdd8v9

Minion, inc., has no debt outstanding and a total market value of $240,900. earnings before interest and taxes, ebit, are projected to be $40,000 if economic conditions are normal. if there is strong expansion in the economy, then ebit will be 14 percent higher. if there is a recession, then ebit will be 25 percent lower. the company is considering a $130,000 debt issue with an interest rate of 7 percent. the proceeds will be used to repurchase shares of stock. there are currently 7,300 shares outstanding. ignore taxes for questions a) and b). assume the company has a market-to-book ratio of 1.0 and the stock price remains constant.

a-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.)
b-1. 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 round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e. g., 32.16.)

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Minion, inc., has no debt outstanding and a total market value of $240,900. earnings before interest...

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