part A: No Debt, No Taxes Recession Normal Expansion

EBIT 17,400 29,000 37,700

Interest 0 0 0
EBT (Taxable Income) 17,400 29,000 37,700
Taxes 0 0 0
Net Income 17,400 29,000 37,700
Number of shares 7,400 7,400 7,400
EPS 2.35 3.92 5.09
Equity 185,000 185,000 185,000
ROE 9.41% 15.68% 20.38%
Market Price =185,000/7,400 = 25
part B: With Debt, No Taxes Recession Normal Expansion
EBIT 17,400 29,000 37,700
Interest 4,550 4,550 4,550
EBT (Taxable Income) 12,850 24,450 33,150
Taxes 0 0 0
Net Income 12,850 24,450 33,150
Number of shares 4,800 4,800 4,800
EPS 2.68 5.09 6.91
Equity 120,000 120,000 120,000
ROE 10.71% 20.38% 27.63%

part C: No Debt, With Taxes Recession Normal Expansion

EBIT 17,400 29,000 37,700
Interest 0 0 0
EBT (Taxable Income) 17,400 29,000 37,700
Taxes at 21% 3,654 6,090 7,917
Net Income 13,746 22,910 29,783
Number of shares 7,400 7,400 7,400
EPS 1.86 3.10 4.02
Equity 185,000 185,000 185,000
ROE 7.43% 12.38% 16.10%

part C: With Debt, With Taxes Recession Normal Expansion

EBIT 17,400 29,000 37,700
Interest 4,550 4,550 4,550
EBT (Taxable Income) 12,850 24,450 33,150
Taxes at 21% 2,699 5,135 6,962
Net Income 10,152 19,316 26,189
Number of shares 4,800 4,800 4,800
EPS 2.11 4.02 5.46
Equity 120,000 120,000 120,000
ROE 8.46% 16.10% 21.82%
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