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Business, 27.11.2019 22:31 yasmin599

Ghost, inc., has no debt outstanding and a total market value of $273,600. earnings before interest and taxes, ebit, are projected to be $43,000 if economic conditions are normal. if there is strong expansion in the economy, then ebit will be 17 percent higher. if there is a recession, then ebit will be 28 percent lower. the company is considering a $145,000 debt issue with an interest rate of 6 percent. the proceeds will be used to repurchase shares of stock. there are currently 7,600 shares outstanding. ignore taxes for questions a and b. assume the company has a market-to-book ratio of 1.0 and the stock price remains constant. a-1. calculate return on equity (roe) under each of the three economic scenarios before any debt is issued.

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Ghost, inc., has no debt outstanding and a total market value of $273,600. earnings before interest...
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