table outlining the income statement with taxes for the three possible states of the economy and assuming the company undertakes the proposed capitalization is shown below. The interest payment and shares repurchased are the same as in part b of Problem 1. Recession Normal Expansion EBIT $7,600 $19,000 $24,700 Interest 7,200 7,200 7,200 Taxes 140 4,130 6,125 NI $ 260 $7,670 $11,375 EPS $0.09 $2.56 $3.79 %EPS –96.91 ––– +48.31 Notice that the percentage change in EPS is the…
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