The three economic scenarios before any debt is issued

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Reference no: EM132065497

Wing Air, Inc. has no debt outstanding and a total market value of $185,667. They provided the following information.

Economic Conditions:

Normal EBIT 15,700

Expansion 18% higher than if normal

Recession 30% lower than if normal

Shares outstanding: 8,450

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 the company goes through with recapitalization. What do you observe? Assume the stock price remains constant.

Download the linked spreadsheet template and use it for your answer. Once complete, upload the template to this question. Don't forget to show your work.

Reference no: EM132065497

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