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Question: basic questions 113 1 ebit and leverage bushranger building ltd...

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BASIC QUESTIONS (1-13 1. EBIT and Leverage. Bushranger Building Ltd (BBL) has no debt outstanding and a total marker will be g a $51 000 value of $156 000. Earnings before interest and taxes, EBIT, are projected to be $13 100 if economic conditions are normal. If there is strong expansion in the economy, then EBIT 15% higher. If there is a recession, then EBIT will be 25% lower. BBL is considerin debt issue with a 5.5%interest rate. The proceeds will be used to repurchase ordinary shares There are currently 7820 ordinary shares outstanding. Ignore taxes for this problem. a. Calculate earnings per share, EPS, under each of the three economic scenarios before any de is issued. Also, calculate the percentage changes in EPS when the economy expands or enter b. Repeat parta, assuming that BBL goes through with recapitalisation. What do you EBIT, Taxes and Leverage. Repeat parts a and b in Problem 1, assuming Bushranger Building a recession. observe? LO 13.1 has a tax rate of 30%. LO 13.2
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