Fujita, Incorporated, has no debt outstanding and a total market value of $\$ 200,000$. 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 25 percent lower. The company is considering a $\$ 65,000$ debt issue with an interest rate of 6 percent. The proceeds will be used to repurchase shares of stock. There are currently 10,000 shares outstanding. Ignore taxes for this problem.
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.)

Step 1 ：First, we calculate the earnings per share (EPS) under each of the three economic scenarios before any debt is issued. The EPS is calculated by dividing the earnings before interest and taxes (EBIT) by the number of shares outstanding. In this case, the EBIT is \$26,000 and there are 10,000 shares outstanding. So, EPS under normal conditions is \$2.60, under expansion is \$2.91, and under recession is \$1.95.

Step 2 ：Next, we calculate the percentage changes in EPS when the economy expands or enters a recession. The percentage change is calculated by subtracting the initial value from the final value, dividing the result by the initial value, and then multiplying by 100 to get a percentage. So, the percentage change under expansion is 12.00% and under recession is -25.00%.

Step 3 ：Then, we calculate the earnings per share (EPS) under each of the three economic scenarios assuming the company goes through with recapitalization. The EPS is calculated by subtracting the interest on the debt from the EBIT and then dividing by the number of shares outstanding. The interest on the debt is calculated by multiplying the debt amount by the interest rate. So, EPS under normal conditions after recapitalization is \$2.21, under expansion is \$2.48, and under recession is \$1.66.

Step 4 ：Finally, we calculate the percentage changes in EPS when the economy expands or enters a recession, given the recapitalization. The percentage change is calculated in the same way as before. So, the percentage change under expansion after recapitalization is 12.00% and under recession is -25.00%.

Step 5 ：\(\boxed{\text{Final Answer:}}\)

Step 6 ：a-1. The earnings per share (EPS) under each of the three economic scenarios before any debt is issued are: Normal: \$2.60, Expansion: \$2.91, Recession: \$1.95.

Step 7 ：a-2. The percentage changes in EPS when the economy expands or enters a recession are: Expansion: 12.00%, Recession: -25.00%.

Step 8 ：b-1. The earnings per share (EPS) under each of the three economic scenarios assuming the company goes through with recapitalization are: Normal: \$2.21, Expansion: \$2.48, Recession: \$1.66.

Step 9 ：b-2. Given the recapitalization, the percentage changes in EPS when the economy expands or enters a recession are: Expansion: 12.00%, Recession: -25.00%.