Calculate earnings per share eps

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Calkaelea inc. has no debt outstanding and a total market value of 81,000 earnings before interest and taxes , EBIT are projected to be 9,800 if economic conditions are normal. if there is strong expansion in the economy then EBIT will be 23 percent higher . if there is a recession then EBIT will be 32 percent lower. the company is considering a 23,100 debt issue with an interest rate of 8 percent, the proceeds will be used to repurchase shares of stock. there are currently 5,400 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.

b. calculate the percentage changes in EPS when the economy expands or enters a recession.

c. assume the company goes through with recapitalization. calculate earnings per share EPS under each of the three economic scenarios after the recapitalization.

d. calculate the percentage changes in EPS when the company expands or enters a recession.

Reference no: EM133075198

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