Minion, Inc., has no debt outstanding and a total market valueof $308,100. Earnings before interest and taxes, EBIT, areprojected to be $46,000 if economic conditions are normal. If thereis strong expansion in the economy, then EBIT will be 20 percenthigher. If there is a recession, then EBIT will be 31 percentlower. The company is considering a $160,000 debt issue with aninterest rate of 5 percent. The proceeds will be used to repurchaseshares of stock. There are currently 7,900 shares outstanding. Thecompany has a tax rate of 24 percent, a market-to-book ratio of1.0, and the stock price remains constant.

a-1. Calculate earnings per share (EPS) under each of the threeeconomic scenarios before any debt is issued. (Do not roundintermediate calculations and round your answers to 2 decimalplaces, e.g., 32.16.)

a-2. Calculate the percentage changes in EPS when the economyexpands or enters a recession. (A negative answer should beindicated by a minus sign. Do not round intermediate calculationsand 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 threeeconomic scenarios assuming the company goes through withrecapitalization. (Do not round intermediate calculations and roundyour answers to 2 decimal places, e.g., 32.16.)

b-2. Given the recapitalization, calculate the percentagechanges in EPS when the economy expands or enters a recession. (Anegative answer should be indicated by a minus sign. Do not roundintermediate calculations and enter your answers as a percentrounded to 2 decimal places, e.g., 32.16.)