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Business, 18.12.2019 03:31 chant9

Precise electronics inc. has projected ebit to be $225,000 for next year. their tax rate is 21% and there is $`500,000 in equity. precise electronics inc has no debt currently, but the board is considering a loan of $150,000 at 8% interest, which they will use to repurchase shares of their own stock at $50 per share. if there is a recession, ebit could be only 75% of projected. if there is an expansion, ebit might be 40% greater than projected. what will their return on equity be under the current structure and under the proposed structure for each scenario? is the restructuring a good idea? current structure: worst case base best case structure: worst case base best case they do the restructuring? yes or no

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