1. Maynard, Inc., has no debt outstanding and a totalmarket value of $250,000. Earning before interest and taxes, EBIT, are projected to be $28,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be percent higher. If there is a recession, then EBIT will be 50 percant lower. Maynard is considering a $90,000 debit issue with a 7 percent rate. The proceeds will be used to repurchase shares of stock. There are currently 5,000 shares outstanding. ignore taxes for this problem.
a. Calculate earnings per share (EPS) under each of the three economic scenarios before any debt is issued. also calculate The persentage changes in EPS when the economy expands or enters a recession.
b. Repeat part (a) assuming that the company goes through with recapitalization. what do you do abserve?