**Fujita, Incorporated: Financial Impact Analysis of Debt Recapitalization**Fujita, Incorporated has no existing debt and a total market value of $222,000. The company's earnings before interest and taxes (EBIT) are projected to be $18,000 under normal economic conditions. Depending on economic variations, EBIT may increase or decrease: a strong economy may boost EBIT by 25%, while a recession could decrease EBIT by 30%. The firm is contemplating a $60,000 debt issuance with a 7% interest rate, intending to use the proceeds for stock repurchase. The firm maintains 7,400 shares, and the market-to-book ratio is assumed constant at 1.0. Taxes are initially ignored for some calculations.**Analysis Before Debt Issuance:***a-1.* **Calculate Return on Equity (ROE) Pre-Debt under Varying Economic Conditions:**- Determine ROE for each scenario: recession, normal, and economic expansion.- *Reminder:* Negative outcomes should be marked with a minus sign. Final results should be presented as percentages rounded to two decimal places.*a-2.* **Evaluate ROE Changes During Economic Shifts Pre-Debt:**- Calculate the percentage change in ROE during recessions and expansions.- *Reminder:* Mark negative results appropriately and use percentage form rounded to two decimal places.---**Analysis Post-Recapitalization (Debt Issuance):***b-1.* **Calculate Return on Equity (ROE) Post-Recapitalization across Economic Conditions:**- Determine the ROE post-debt in each economic scenario.- *Reminder:* Indicate negative numbers with a minus sign. Round results to two decimal digits as percentages.*b-2.* **Evaluate Percentage ROE Changes During Economic Shifts Post-Recapitalization:**- Calculate how ROE changes percentage-wise for each economic condition post-recapitalization.---*Assumption:* The applicable tax rate in further analysis is 21%.**Detailed Financial Analysis Including Tax Considerations:***c-1.* **Pre-Debt Issuance Analysis with Tax Impact:**- Calculate ROE considering taxes under each economic scenario.- Determine the percentage ROE change during expansion and recession.- *Note:* Negative outputs should be shown with a minus. Round to two decimal places.*c-2.* **Post-Recapitalization ROE and Percentage Change Analysis with Tax Impact:**- Complete

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Fujita, Incorporated, has no debt outstanding and a total market value of $222,000. Earnings before interest and taxes, EBIT, are projected to be $18,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 25 percent higher. If there is a recession, then EBIT will be 30 percent lower. The company is considering a $60,000 debt issue with an interest rate of 7 percent. The proceeds will be used to repurchase shares of stock. There are currently 7,400 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 return on equity, ROE, under each of the three economic scenarios before any debt is issued, assuming no taxes. Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. a-2. Calculate the percentage changes in ROE for economic expansion or recession, assuming no taxes. Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to the nearest whole number, e.g., 32. b-1. Calculate return on equity, ROE, under each of the three economic scenarios after the recapitalization. Note: 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-2. Calculate the percentage changes in ROE for economic expansion and recession after the recapitalization. Note: 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. a-1. Recession ROE Normal ROE Expansion ROE a-2. Percentage change in recession ROE Percentage change in expansion ROE b-1. Recession ROE Normal ROE Expansion ROE b-2. Percentage change in recession ROE Percentage change in expansion ROE 4.48 % 6.41 % 8.01 % -30.00 % 25.00 % 4.10 % 6.73 % 8.92 % -39.13 % 32.61 % Assume the firm has a tax rate of 21 percent. c-1. Calculate return on equity, ROE, under each of the three economic scenarios before any debt is issued. Also, calculate the percentage changes in ROE for economic expansion and recession. Note: 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. c-2. Calculate return on equity, ROE, under each of the three economic scenarios after the recapitalization. Also, calculate the percentage changes in ROE for economic expansion and recession, assuming the firm goes through with the proposed recapitalization. Note: 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.