Ornaments, Inc., is an all-equity firm with a total market value of $641,000 and 30,600 shares of stock outstanding. Management believes the earnings before interest and taxes (EBIT) will be $91,700 if the economy is normal. If there is a recession, EBIT will be 15 percent lower, and if there is a boom, EBIT will be 25 percent higher. The tax rate is 35 percent. What is the EPS in a recession?

Ornaments, Inc., is an all-equity firm with a total market value of $641,000 and 30,600 shares of stock outstanding. Management believes the earnings before interest and taxes (EBIT) will be $91,700 if the economy is normal. If there is a recession, EBIT will be 15 percent lower, and if there is a boom, EBIT will be 25 percent higher. The tax rate is 35 percent. What is the EPS in a recession?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section: Chapter Questions

Problem 9P

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