Sunrise, Inc., has no debt outstanding and a total market value of $369,600. Earnings before interest...

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Sunrise, Inc., has no debt outstanding and a total market valueof $369,600. Earnings before interest and taxes, EBIT, areprojected to be $51,000 if economic conditions are normal. If thereis strong expansion in the economy, then EBIT will be 15 percenthigher. If there is a recession, then EBIT will be 24 percentlower. The company is considering a $185,000 debt issue with aninterest rate of 6 percent. The proceeds will be used to repurchaseshares of stock. There are currently 8,400 shares outstanding.Ignore taxes for questions a and b. Assume the company has amarket-to-book ratio of 1.0 and the stock price remainsconstant.
Assume the company has a tax rate of 24%

a-1.
Calculate return on equity (ROE) under each of the threeeconomic scenarios before any debt is issued. (Do not roundintermediate calculations and enter your answers as a percentrounded to 2 decimal places, e.g., 32.16.)
a-2. Calculate the percentage changes in ROE 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. Assume the firm goes through with the proposedrecapitalization. Calculate the return on equity (ROE) under eachof the three economic scenarios. (Do not round intermediatecalculations and enter your answers as a percent rounded to 2decimal places, e.g., 32.16.)
b-2. Assume the firm goes through with the proposedrecapitalization. Calculate the percentage changes in ROE when theeconomy expands or enters a recession. (A negative answershould be indicated by a minus sign. Do not round intermediatecalculations and enter your answers as a percent rounded to 2decimal places, e.g., 32.16.)**

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Sunrise, Inc., has no debt outstanding and a total market valueof $369,600. Earnings before interest and taxes, EBIT, areprojected to be $51,000 if economic conditions are normal. If thereis strong expansion in the economy, then EBIT will be 15 percenthigher. If there is a recession, then EBIT will be 24 percentlower. The company is considering a $185,000 debt issue with aninterest rate of 6 percent. The proceeds will be used to repurchaseshares of stock. There are currently 8,400 shares outstanding.Ignore taxes for questions a and b. Assume the company has amarket-to-book ratio of 1.0 and the stock price remainsconstant.**Assume the company has a tax rate of 24% a-1.Calculate return on equity (ROE) under each of the threeeconomic scenarios before any debt is issued. (Do not roundintermediate calculations and enter your answers as a percentrounded to 2 decimal places, e.g., 32.16.)a-2.Calculate the percentage changes in ROE 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.Assume the firm goes through with the proposedrecapitalization. Calculate the return on equity (ROE) under eachof the three economic scenarios. (Do not round intermediatecalculations and enter your answers as a percent rounded to 2decimal places, e.g., 32.16.)b-2.Assume the firm goes through with the proposedrecapitalization. Calculate the percentage changes in ROE when theeconomy expands or enters a recession. (A negative answershould be indicated by a minus sign. Do not round intermediatecalculations and enter your answers as a percent rounded to 2decimal places, e.g., 32.16.)

a-1.	Calculate return on equity (ROE) under each of the threeeconomic scenarios before any debt is issued. (Do not roundintermediate calculations and enter your answers as a percentrounded to 2 decimal places, e.g., 32.16.)
a-2.	Calculate the percentage changes in ROE 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.	Assume the firm goes through with the proposedrecapitalization. Calculate the return on equity (ROE) under eachof the three economic scenarios. (Do not round intermediatecalculations and enter your answers as a percent rounded to 2decimal places, e.g., 32.16.)
b-2.	Assume the firm goes through with the proposedrecapitalization. Calculate the percentage changes in ROE when theeconomy expands or enters a recession. (A negative answershould be indicated by a minus sign. Do not round intermediatecalculations and enter your answers as a percent rounded to 2decimal places, e.g., 32.16.)