Minion, Inc., has no debt outstanding and a total market value of $320,000. Earningsbefore interest and taxes, EBIT, are projected to be $47,000 if economic conditions arenormal. If there is strong expansion in the economy, then EBIT will be 19 percent higher.If there is a recession, then EBIT will be 30 percent lower. The company is considering a$165,000 debt issue with an interest rate of 6 percent. The proceeds will be used torepurchase shares of stock. There are currently 8,000 shares outstanding. Thecompany has a tax rate of 25 percent, a market-to-book ratio of 1.0, and the stock priceremains constant.a-1. Calculate earnings per share (EPS) under each of the three economic scenariosbefore any debt is issued. (Do not round intermediate calculations and roundyour answers to 2 decimal places, e.g., 32.16.)a-2. Calculate the percentage changes in EPS when the economy expands or enters arecession. (A negative answer should be indicated by a minus sign. Do not roundintermediate calculations and enter your answers as a percent rounded to 2decimal places, e.g., 32.16.)b-1. Calculate earnings per share (EPS) under each of the three economic scenariosassuming the company goes through with recapitalization. (Do not roundintermediate 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 theeconomy expands or enters a recession. (A negative answer should be indicatedby a minus sign. Do not round intermediate calculations and enter your answersas a percent rounded to 2 decimal places, e.g., 32.16.)

EPS=Earnings attributable to Equity shareholders/ Number of shares Earnings attributable to…

Answered: Minion, Inc., has no debt outstanding…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 12P

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Minion, Inc., has no debt outstanding and a total market value of $284,900. Earnings before interest and taxes, EBIT, are projected to be $44,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 18 percent higher. If there is a recession, then EBIT will be 29 percent lower. The company is considering a $150,000 debt issue with an interest rate of 7 percent. The proceeds will be used to repurchase shares of stock. There are currently 7,700 shares outstanding. The company has a tax rate of 22 percent, a market-to-book ratio of 1.0, and the stock price remains constant. 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.)b-1. Calculate earnings per share (EPS) under each of the three economic scenarios assuming the company goes through with recapitalization. (Do not round…
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Minion, Inc., has no debt outstanding and a total market value of $240,000. Earnings before interest and taxes, EBIT, are projected to be $36,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 20 percent higher. If there is a recession, then EBIT will be 25 percent lower. The company is considering a $155,000 debt issue with an interest rate of 6 percent. The proceeds will be used to repurchase shares of stock. There are currently 6,000 shares outstanding. Ignore taxes for this problem. 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…
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Fujita, Incorporated, has no debt outstanding and a total market value of $422,400. Earnings before interest and taxes, EBIT, are projected to be $55,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 14 percent higher. If there is a recession, then EBIT will be 20 percent lower. The company is considering a $205,000 debt issue with an interest rate of 6 percent. The proceeds will be used to repurchase shares of stock. There are currently 8,800 shares outstanding. The company has a tax rate of 23 percent, a market-to-book ratio of 1.0 before recapitalization, and the stock price changes according to M&M. a-1. a-2. 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…

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