The EPS (Earnings per share) under three scenarios before the debt issue and the changes in EPS while the economy expands a recession. Introduction: The EPS is the part of the profit of a firm that is allocated to every outstanding share of the common stock. It indicates the profitability of the company. Answer: The EPS under the recession, normal, and expansion periods are $2.48, $3.82, and $4.77 respectively and the percentage of change in EPS is -35% and +25 for the recession and expansion periods respectively.

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Answer 1

Question

Chapter 16, Problem 1QP

a)

Summary Introduction

To calculate: The EPS (Earnings per share) under three scenarios before the debt issue and the changes in EPS while the economy expands a recession.

Introduction:

The EPS is the part of the profit of a firm that is allocated to every outstanding share of the common stock. It indicates the profitability of the company.

Answer:

The EPS under the recession, normal, and expansion periods are $2.48, $3.82, and $4.77 respectively and the percentage of change in EPS is -35% and +25 for the recession and expansion periods respectively.

b)

Summary Introduction

To calculate: The EPS (Earnings per share) under three scenarios before the debt issue and the changes in EPS while the economy expands a recession by assuming that the firm undergoes the planned recapitalization.

Introduction:

The EPS is the part of the profit of a firm that is allocated to every outstanding share of the common stock. It indicates the profitability of the company.

Answer:

After recapitalization, the EPS under the recession, normal, and expansion periods are $2.70, $4.80, and $6.30 respectively and the percentage of change in EPS is -43.75% and +31.25 for the recession and expansion periods respectively.

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# 5 Fujita, Incorporated, has no debt outstanding and a total market value of $369,600. Earnings before interest and taxes, EBIT, are projected to be $51,000 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 24 percent lower. The company is considering a $185,000 debt issue with an interest rate of 6 percent. The proceeds will be used to repurchase shares of stock. There are currently 8,400 shares outstanding. The company has a tax rate of 24 percent, a market-to-book ratio of 1.0 before recapitalization, and the stock price changes according to M&M. 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…

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Answer 2

Question

Chapter 16, Problem 1QP

a)

Summary Introduction

To calculate: The EPS (Earnings per share) under three scenarios before the debt issue and the changes in EPS while the economy expands a recession.

Introduction:

The EPS is the part of the profit of a firm that is allocated to every outstanding share of the common stock. It indicates the profitability of the company.

Answer:

The EPS under the recession, normal, and expansion periods are $2.48, $3.82, and $4.77 respectively and the percentage of change in EPS is -35% and +25 for the recession and expansion periods respectively.

b)

Summary Introduction

To calculate: The EPS (Earnings per share) under three scenarios before the debt issue and the changes in EPS while the economy expands a recession by assuming that the firm undergoes the planned recapitalization.

Introduction:

The EPS is the part of the profit of a firm that is allocated to every outstanding share of the common stock. It indicates the profitability of the company.

Answer:

After recapitalization, the EPS under the recession, normal, and expansion periods are $2.70, $4.80, and $6.30 respectively and the percentage of change in EPS is -43.75% and +31.25 for the recession and expansion periods respectively.

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Answer 3

Question

Chapter 16, Problem 1QP

a)

Summary Introduction

To calculate: The EPS (Earnings per share) under three scenarios before the debt issue and the changes in EPS while the economy expands a recession.

Introduction:

The EPS is the part of the profit of a firm that is allocated to every outstanding share of the common stock. It indicates the profitability of the company.

Answer:

The EPS under the recession, normal, and expansion periods are $2.48, $3.82, and $4.77 respectively and the percentage of change in EPS is -35% and +25 for the recession and expansion periods respectively.

b)

Summary Introduction

To calculate: The EPS (Earnings per share) under three scenarios before the debt issue and the changes in EPS while the economy expands a recession by assuming that the firm undergoes the planned recapitalization.

Introduction:

The EPS is the part of the profit of a firm that is allocated to every outstanding share of the common stock. It indicates the profitability of the company.

Answer:

After recapitalization, the EPS under the recession, normal, and expansion periods are $2.70, $4.80, and $6.30 respectively and the percentage of change in EPS is -43.75% and +31.25 for the recession and expansion periods respectively.

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Answer 4

Question

Chapter 16, Problem 1QP

a)

Summary Introduction

To calculate: The EPS (Earnings per share) under three scenarios before the debt issue and the changes in EPS while the economy expands a recession.

Introduction:

The EPS is the part of the profit of a firm that is allocated to every outstanding share of the common stock. It indicates the profitability of the company.

Answer:

The EPS under the recession, normal, and expansion periods are $2.48, $3.82, and $4.77 respectively and the percentage of change in EPS is -35% and +25 for the recession and expansion periods respectively.

b)

Summary Introduction

To calculate: The EPS (Earnings per share) under three scenarios before the debt issue and the changes in EPS while the economy expands a recession by assuming that the firm undergoes the planned recapitalization.

Introduction:

The EPS is the part of the profit of a firm that is allocated to every outstanding share of the common stock. It indicates the profitability of the company.

Answer:

After recapitalization, the EPS under the recession, normal, and expansion periods are $2.70, $4.80, and $6.30 respectively and the percentage of change in EPS is -43.75% and +31.25 for the recession and expansion periods respectively.

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Answer 5

Chapter 16, Problem 1QP

a)

Summary Introduction

To calculate: The EPS (Earnings per share) under three scenarios before the debt issue and the changes in EPS while the economy expands a recession.

Introduction:

The EPS is the part of the profit of a firm that is allocated to every outstanding share of the common stock. It indicates the profitability of the company.

Answer:

The EPS under the recession, normal, and expansion periods are $2.48, $3.82, and $4.77 respectively and the percentage of change in EPS is -35% and +25 for the recession and expansion periods respectively.

b)

Summary Introduction

To calculate: The EPS (Earnings per share) under three scenarios before the debt issue and the changes in EPS while the economy expands a recession by assuming that the firm undergoes the planned recapitalization.

Introduction:

The EPS is the part of the profit of a firm that is allocated to every outstanding share of the common stock. It indicates the profitability of the company.

Answer:

After recapitalization, the EPS under the recession, normal, and expansion periods are $2.70, $4.80, and $6.30 respectively and the percentage of change in EPS is -43.75% and +31.25 for the recession and expansion periods respectively.

Answer 6

Chapter 16, Problem 1QP

a)

Summary Introduction

To calculate: The EPS (Earnings per share) under three scenarios before the debt issue and the changes in EPS while the economy expands a recession.

Introduction:

The EPS is the part of the profit of a firm that is allocated to every outstanding share of the common stock. It indicates the profitability of the company.

Answer:

The EPS under the recession, normal, and expansion periods are $2.48, $3.82, and $4.77 respectively and the percentage of change in EPS is -35% and +25 for the recession and expansion periods respectively.

Answer 7

Chapter 16, Problem 1QP

a)

Summary Introduction

To calculate: The EPS (Earnings per share) under three scenarios before the debt issue and the changes in EPS while the economy expands a recession.

Introduction:

The EPS is the part of the profit of a firm that is allocated to every outstanding share of the common stock. It indicates the profitability of the company.

Answer:

The EPS under the recession, normal, and expansion periods are $2.48, $3.82, and $4.77 respectively and the percentage of change in EPS is -35% and +25 for the recession and expansion periods respectively.

Answer 8

b)

Summary Introduction

To calculate: The EPS (Earnings per share) under three scenarios before the debt issue and the changes in EPS while the economy expands a recession by assuming that the firm undergoes the planned recapitalization.

Introduction:

The EPS is the part of the profit of a firm that is allocated to every outstanding share of the common stock. It indicates the profitability of the company.

Answer:

After recapitalization, the EPS under the recession, normal, and expansion periods are $2.70, $4.80, and $6.30 respectively and the percentage of change in EPS is -43.75% and +31.25 for the recession and expansion periods respectively.

Answer 9

b)

Summary Introduction

To calculate: The EPS (Earnings per share) under three scenarios before the debt issue and the changes in EPS while the economy expands a recession by assuming that the firm undergoes the planned recapitalization.

Introduction:

The EPS is the part of the profit of a firm that is allocated to every outstanding share of the common stock. It indicates the profitability of the company.

Answer:

After recapitalization, the EPS under the recession, normal, and expansion periods are $2.70, $4.80, and $6.30 respectively and the percentage of change in EPS is -43.75% and +31.25 for the recession and expansion periods respectively.

Answer 10

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Answer 13

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Solution Summary: The author calculates the EPS (Earnings per share) under the recession, normal, and expansion periods.

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