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Calculate earnings per share, EPS, under each of the three economic scenarios before any debt is issued. Also, calculate the percentage changes in EPS when the economy expands or enters a recession.Repeat part (a) assuming that Kaelea goes through with re

01 / 10 / 2021 Assignment

This paper circulates around the core theme of Calculate earnings per share, EPS, under each of the three economic scenarios before any debt is issued. Also, calculate the percentage changes in EPS when the economy expands or enters a recession.Repeat part (a) assuming that Kaelea goes through with re together with its essential aspects. It has been reviewed and purchased by the majority of students thus, this paper is rated 4.8 out of 5 points by the students. In addition to this, the price of this paper commences from £ 99. To get this paper written from the scratch, order this assignment now. 100% confidential, 100% plagiarism-free.

EBIT and Leverage. Kaelea, Inc., has no debt outstanding and a total market
value of $125,000. Earnings before interest and taxes, EBIT, are projected to
be $10,400 if economic conditions are normal. If there is strong expansion in
the economy, then EBIT will be 20 percent higher. If there is a recession, then
EBIT will be 35 percent lower. Kaelea is considering a $42,000 debt issue with
a 6 percent interest rate. The proceeds will be used to repurchase shares of
stock. There are currently 6,250 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
percentage changes in EPS when the economy expands or enters a recession.

b. Repeat part (a) assuming that Kaelea goes through with
recapitalization. What do you observe?



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