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Fowler, Inc., has no debt outstanding and a total market value of $150,000. Earnings before interest and taxes, EBIT, are projected to be $26,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 12 percent higher. If there is a recession, then EBIT will be 20 percent lower. The firm is considering a debt issue of $90,000 with an interest rate of 6 percent. The proceeds will be used to repurchase shares of stock. There are currently 10,000 shares outstanding. The firm has a tax rate 22 percent. Assume the stock price is constant under all scenarios.
a-1.	Calculate earnings per share (EPS) under each of the three economic scenarios before any debt is issued. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
a-2.	Calculate the percentage changes in EPS when the economy expands or enters a recession. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
b-1.	Calculate earnings per share (EPS) under each of the three economic scenarios assuming the company goes through with recapitalization. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
b-2.	Given the recapitalization, calculate the percentage changes in EPS when the economy expands or enters a recession. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Fawer, Inc., has na deht autstanding and a total marker value of \$\$DODDd. Earnhgs before interest and texes, EBIT, are prolected to be 326,C00 ri economi conditions are nanmal. If thera ba strong axpansian in the pconamy then FRIT will be 12 parcent hicher. If there is a recession, then EBIT will be 20 percent lower. The firm a considering a dett repurchese sharas of stock. There sre currently 00,000 sheres outatending. The firm has a tas rate 22 percent focime the srock prke is canslant unter all aceraring -1. Colculate eamings per share (ETS) uncer eacti af the the ee ecenomic scer seies bafore zny dobt z lzzucd. \{Do not round intermediate calculationa and round your nnwwers to 2 decimm plsces, e.5, 32.16.) a-2. Calculate the parcontaga changat in EP's whan tha cconomy cxpands ar antors a recessurn. (A negotive answer should be indicated by n minus sign. Do not round intermediete caleulations and enter your answers as a percent rounded to 2 decimel pleces, e.g. 32.16.) b.1. Calculate eamings per shere (EPS) uncier ssch at the thres ecanomic scerarias assuming the company goes throuchh with recepteizstior. (Do not round intemediate caleulations and raund your anawers to 2 decimal pleces, t.g., 32.16.) b.2. Giton the recapialisatian, rakulire the feerenenge changes in FP5 when the cacoomy copsncz or entars a racesalon. (A negative answer should be indicated by t minus sign. Da nat round intermediete ealeuletient and enter yeur enwwera as a percent rounded to 2 decimel placez, e.9-32.16

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