Questions
Consider the current situation with the Covid-19 virus and its effects on the US economy. Draw...

Consider the current situation with the Covid-19 virus and its effects on the US economy.

  1. Draw out the AD/AS model starting at the long run equilibrium. Indicate all points and curves on the graph. Find the US Real GDP and CPI as of December 2019 (online). Use these values as the price level and natural rate of output in the long-run equilibrium. (10 points)

  1. Explain the supply-side shocks coming from the Covid-19 virus. How would these supply-side shocks affect the AD/AS model from part (1)? Explain in words and graphically how these shocks would affect the macro-economy. Draw and analyze the effect of the shock on the AD/AS model, how does it affect production, unemployment, price level and inflation? (10 points)

  1. Explain the demand-side shocks coming from the Covid-19 virus. How would these demand-side shocks affect the AD/AS model from part (1)? Explain in words and graphically how these shocks would affect the macro-economy. Draw and analyze the effect of the shock on the AD/AS model, how does it affect production, unemployment, price level and inflation? (10 points)

  1. Illustrate the impact on the AD-AS model when both of these shocks are happening at the same time. What do we know will happen for certain, what is unknown, with respect to price level changes and production changes? (10 points)

  1. How has the Federal Reserve responded to these shocks? What type of monetary policy changes have taken place? Explain in words and graphically using the MD/MS model. (10 points)

  1. How has the Federal government and Congress responded to these shocks? What type of stimulus package has been passed? Explain. (10 points)

  1. Consider the $2 trillion Congress has approved to be spent as a counter-shock to the recessionary pressures.

  1. If the marginal propensity to consume is ½, what is size of the multiplier effect? (3 points)
  2. If the package needs to be financed by new government bonds, and the result is an increase in interest rates by 0.5%, and investment spending declines by $100 million for each 1% increase in interest rates, what is the crowding out effect? (3 points)
  3. What will be the net effect of the stimulus package, considering both parts a. and b.? Which effect dominates and why? (4 points)

  1. In a generalized AD/AS model (without specific numbers), illustrate and explain how the changes in monetary and fiscal policy act as a counter-shock to the demand and supply side shocks coming from Covid-19. Draw your model starting from (3) and then include the effects of the (5) and (7) on the graph. (10 points)

  1. What is the tradeoff that the government faces when enacting these counter-shock measures? Relate this specifically to the Phillips Curve. (10 points)

In: Economics

The x slider will control the circles with id xl and xr.    As the sliders move...

The x slider will control the circles with id xl and xr.    As the sliders move too the right the two circles get closer together until they meet in the middle. The y slider will control the circles with id yt and yb.    As the sliders move too the right the two circles get closer together until they meet in the middle. When all four circles are in the green square the circle should be red and black otherwise. The position and size of the square is random, and changes position and size when you load the page.

Instructions:

  • Start with the files in midW05.zip.
  • When all the circles are in the square all the circles should be red.
  • Write a helper function call isCircleInRect that accepts an id of a circle and an id of a red box returns true if the center of the circle is in the box and false otherwise.
  • Implement the sliderXListener such that the two circles with id's xl and xr move closers together as the slider value increases and meet at the middle, changes the color of the circle if necessary.
  • Implement the sliderYListener such that the two circles with id's yt and yb move closers together as the slider value increases and meet at the middle, changes the color of the circle if necessary.
  • Uses the helper functions isCircleInRect to help implement the event listeners.

.html file:

<!DOCTYPE html>

<html lang="en">

<head>

    <meta charset="UTF-8">

    <meta name="viewport" content="width=device-width, initial-scale=1.0">

    <script src="questionW05.js" defer></script>

    <title>Midterm Question</title>

    <script>

        function setup(){

            let box = document.querySelector("#box");

            let size = Math.random()*20 + 90;

            let x = Math.random()*10 + 45;

            let y = Math.random()*10 + 45;

            box.setAttribute("x",x);

            box.setAttribute("y",y);

            box.setAttribute("width",size);

            box.setAttribute("height", size);

        }

    </script>

</head>

<body onload="setup()">

    <svg width="200px" height="200px">

        <!-- the size and position of the rectangle changes randomly

            when the page is reloaded -->

        <rect id="box" x="50" y="50" width = "100" height="100" fill="green"/>

        <g id="circles">

            <circle id="xl" cx="0" r="10" cy="100" fill="black" />

            <circle id="xr" cx="200" r="10" cy="100" fill="black" />

            <circle id="yt" cx="100" r="10" cy="0" fill="black" />

            <circle id="yb" cx="100" r="10" cy="200" fill="black" />

        </g>

        

    </svg><br>

    <label>X Slider</label><input id="xSlider" type="range" min="0" max="100" value="0" oninput="sliderXListener(event)"><br>

    <label>Y Slider</label><input id="ySlider" type="range" min="0" max="100" value="0" oninput="sliderYListener(event)"><br>

</body>

</html>

.js file:

function isCircleInRect(circ, rect){

}

function sliderXListener(event){

  

}

function sliderYListener(event){

}

In: Computer Science

Sunrise, Inc., has no debt outstanding and a total market value of $344,400. Earnings before interest...

Sunrise, Inc., has no debt outstanding and a total market value of $344,400. Earnings before interest and taxes, EBIT, are projected to be $49,000 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 26 percent lower. The company is considering a $175,000 debt issue with an interest rate of 8 percent. The proceeds will be used to repurchase shares of stock. There are currently 8,200 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. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
a-2. Calculate the percentage changes in ROE 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. Assume the firm goes through with the proposed recapitalization. Calculate the return on equity (ROE) under each of the three economic scenarios. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
b-2.

Assume the firm goes through with the proposed recapitalization. Calculate the percentage changes in ROE 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.)

Assume the firm has a tax rate of 22 percent.
c-1. Calculate return on equity (ROE) under each of the three economic scenarios before any debt is issued. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
c-2. Calculate the percentage changes in ROE 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.)
c-3. Calculate the return on equity (ROE) under each of the three economic scenarios assuming the firm goes through with the recapitalization. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
c-4. Given the recapitalization, calculate the percentage changes in ROE 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.)

In: Finance

RAK, Inc., has no debt outstanding and a total market value of $220,000. Earnings before interest...

RAK, Inc., has no debt outstanding and a total market value of $220,000. Earnings before interest and taxes, EBIT, are projected to be $40,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 10 percent higher. If there is a recession, then EBIT will be 20 percent lower. RAK is considering a $135,000 debt issue with an interest rate of 4 percent. The proceeds will be used to repurchase shares of stock. There are currently 11,000 shares outstanding. Ignore taxes for questions a and b. Assume the company has a market-to-book ratio of 1.0.

  

a-1

Calculate return on equity (ROE) under each of the three economic scenarios before any debt is issued. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

  

ROE
  Recession %  
  Normal %  
  Expansion %  

  

a-2

Calculate the percentage changes in ROE when the economy expands or enters a recession. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

  

% change in ROE
  Recession %  
  Expansion %  

  

Assume the firm goes through with the proposed recapitalization.
b-1

Calculate the return on equity (ROE) under each of the three economic scenarios. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

  

ROE
  Recession %  
  Normal %  
  Expansion %  

  

b-2

Calculate the percentage changes in ROE when the economy expands or enters a recession. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

  

% change in ROE
  Recession %  
  Expansion %  

  

Assume the firm has a tax rate of 35 percent.

  

c-1

Calculate return on equity (ROE) under each of the three economic scenarios before any debt is issued. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

  

ROE
  Recession %  
  Normal %  
  Expansion %  

  

c-2

Calculate the percentage changes in ROE when the economy expands or enters a recession. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

  

% change in ROE
  Recession %  
  Expansion %  

  

c-3

Calculate the return on equity (ROE) under each of the three economic scenarios assuming the firm goes through with the recapitalization. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

  

ROE
  Recession %  
  Normal %  
  Expansion %  

  

c-4

Given the recapitalization, calculate the percentage changes in ROE when the economy expands or enters a recession. (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16))

  

% change in ROE
  Recession %  
  Expansion %  

In: Finance

RAK, Inc., has no debt outstanding and a total market value of $240,000. Earnings before interest...

RAK, Inc., has no debt outstanding and a total market value of $240,000. Earnings before interest and taxes, EBIT, are projected to be $28,000 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. RAK is considering a $140,000 debt issue with an interest rate of 6 percent. The proceeds will be used to repurchase shares of stock. There are currently 12,000 shares outstanding. Ignore taxes for questions a and b. Assume the company has a market-to-book ratio of 1.0.

  

a-1

Calculate return on equity (ROE) under each of the three economic scenarios before any debt is issued. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

  

ROE
  Recession %  
  Normal %  
  Expansion %  

  

a-2

Calculate the percentage changes in ROE when the economy expands or enters a recession. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

  

% change in ROE
  Recession %  
  Expansion %  

  

Assume the firm goes through with the proposed recapitalization.
b-1

Calculate the return on equity (ROE) under each of the three economic scenarios. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

  

ROE
  Recession %  
  Normal %  
  Expansion %  

  

b-2

Calculate the percentage changes in ROE when the economy expands or enters a recession. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

  

% change in ROE
  Recession %  
  Expansion %  

  

Assume the firm has a tax rate of 35 percent.

  

c-1

Calculate return on equity (ROE) under each of the three economic scenarios before any debt is issued. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

  

ROE
  Recession %  
  Normal %  
  Expansion %  

  

c-2

Calculate the percentage changes in ROE when the economy expands or enters a recession. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

  

% change in ROE
  Recession %  
  Expansion %  

  

c-3

Calculate the return on equity (ROE) under each of the three economic scenarios assuming the firm goes through with the recapitalization. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

  

ROE
  Recession %  
  Normal %  
  Expansion %  

  

c-4

Given the recapitalization, calculate the percentage changes in ROE when the economy expands or enters a recession. (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16))

  

% change in ROE
  Recession %  
  Expansion %  

In: Finance

Money, Inc., has no debt outstanding and a total market value of $240,000. Earnings before interest...

Money, Inc., has no debt outstanding and a total market value of $240,000. Earnings before interest and taxes, EBIT, are projected to be $28,000 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. Money is considering a $140,000 debt issue with an interest rate of 6 percent. The proceeds will be used to repurchase shares of stock. There are currently 12,000 shares outstanding. Ignore taxes for questions a and b. Assume the company has a market-to-book ratio of 1.0.

  

a-1.

Calculate return on equity (ROE) under each of the three economic scenarios before any debt is issued. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))
ROE
  Recession %  
  Normal %  
  Expansion %  

  

a-2.

Calculate the percentage changes in ROE when the economy expands or enters a recession. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.)
% change in ROE
  Recession %  
  Expansion %  

  

Assume the firm goes through with the proposed recapitalization.
b-1.

Calculate the return on equity (ROE) under each of the three economic scenarios. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))
ROE
  Recession %  
  Normal %  
  Expansion %  

  

b-2.

Calculate the percentage changes in ROE when the economy expands or enters a recession. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))
% change in ROE
  Recession %  
  Expansion %  

  

Assume the firm has a tax rate of 35 percent.
c-1.

Calculate return on equity (ROE) under each of the three economic scenarios before any debt is issued. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))
ROE
  Recession %  
  Normal %  
  Expansion %  
c-2.

Calculate the percentage changes in ROE when the economy expands or enters a recession. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.)
% change in ROE
  Recession %  
  Expansion %  

  

c-3.

Calculate the return on equity (ROE) under each of the three economic scenarios assuming the firm goes through with the recapitalization. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))
ROE
  Recession %  
  Normal %  
  Expansion %  
c-4.

Given the recapitalization, calculate the percentage changes in ROE when the economy expands or enters a recession. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))
% change in ROE
  Recession %  
  Expansion %  

In: Finance

Minion, Inc., has no debt outstanding and a total market value of $436,100. Earnings before interest...

Minion, Inc., has no debt outstanding and a total market value of $436,100. Earnings before interest and taxes, EBIT, are projected to be $56,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 15 percent higher. If there is a recession, then EBIT will be 20 percent lower. The company is considering a $210,000 debt issue with an interest rate of 7 percent. The proceeds will be used to repurchase shares of stock. There are currently 8,900 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. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
a-2. Calculate the percentage changes in ROE 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. Assume the firm goes through with the proposed recapitalization. Calculate the return on equity, ROE, under each of the three economic scenarios. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
b-2. Assume the firm goes through with the proposed recapitalization. Calculate the percentage changes in ROE 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.)
Assume the firm has a tax rate of 24 percent.
c-1. Calculate return on equity (ROE) under each of the three economic scenarios before any debt is issued. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
c-2. Calculate the percentage changes in ROE 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.)
c-3. Calculate the return on equity (ROE) under each of the three economic scenarios assuming the firm goes through with the recapitalization. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
c-4. Given the recapitalization, calculate the percentage changes in ROE 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.)

In: Finance

Minion, Inc., has no debt outstanding and a total market value of $408,900. Earnings before interest...

Minion, Inc., has no debt outstanding and a total market value of $408,900. Earnings before interest and taxes, EBIT, are projected to be $54,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 13 percent higher. If there is a recession, then EBIT will be 21 percent lower. The company is considering a $200,000 debt issue with an interest rate of 5 percent. The proceeds will be used to repurchase shares of stock. There are currently 8,700 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. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
a-2. Calculate the percentage changes in ROE 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. Assume the firm goes through with the proposed recapitalization. Calculate the return on equity, ROE, under each of the three economic scenarios. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
b-2. Assume the firm goes through with the proposed recapitalization. Calculate the percentage changes in ROE 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.)


      


Assume the firm has a tax rate of 22 percent.
c-1. Calculate return on equity (ROE) under each of the three economic scenarios before any debt is issued. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
c-2.

Calculate the percentage changes in ROE 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.)
c-3. Calculate the return on equity (ROE) under each of the three economic scenarios assuming the firm goes through with the recapitalization. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
c-4.

Given the recapitalization, calculate the percentage changes in ROE 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.)

*** only need c1-c4

In: Finance

RAK, Inc., has no debt outstanding and a total market value of $150,000. Earnings before interest...

RAK, Inc., has no debt outstanding and a total market value of $150,000. Earnings before interest and taxes, EBIT, are projected to be $36,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 15 percent higher. If there is a recession, then EBIT will be 25 percent lower. RAK is considering a $95,000 debt issue with an interest rate of 8 percent. The proceeds will be used to repurchase shares of stock. There are currently 6,000 shares outstanding. Ignore taxes for questions a and b. Assume the company has a market-to-book ratio of 1.0. a-1 Calculate return on equity (ROE) under each of the three economic scenarios before any debt is issued. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) ROE Recession % Normal % Expansion % a-2 Calculate the percentage changes in ROE when the economy expands or enters a recession. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) % change in ROE Recession % Expansion % Assume the firm goes through with the proposed recapitalization. b-1 Calculate the return on equity (ROE) under each of the three economic scenarios. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) ROE Recession % Normal % Expansion % b-2 Calculate the percentage changes in ROE when the economy expands or enters a recession. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) % change in ROE Recession % Expansion % Assume the firm has a tax rate of 35 percent. c-1 Calculate return on equity (ROE) under each of the three economic scenarios before any debt is issued. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) ROE Recession % Normal % Expansion % c-2 Calculate the percentage changes in ROE when the economy expands or enters a recession. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) % change in ROE Recession % Expansion % c-3 Calculate the return on equity (ROE) under each of the three economic scenarios assuming the firm goes through with the recapitalization. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) ROE Recession % Normal % Expansion % c-4 Given the recapitalization, calculate the percentage changes in ROE when the economy expands or enters a recession. (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16)) % change in ROE Recession % Expansion %

In: Finance

Castle, Inc., has no debt outstanding and a total market value of $150,000. Earnings before interest...

Castle, Inc., has no debt outstanding and a total market value of $150,000. Earnings before interest and taxes, EBIT, are projected to be $36,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 15 percent higher. If there is a recession, then EBIT will be 25 percent lower. The firm is considering a debt issue of $95,000 with an interest rate of 8 percent. The proceeds will be used to repurchase shares of stock. There are currently 6,000 shares outstanding. Ignore taxes for questions a and b. Assume the stock price remains constant.


a-1. Calculate return on equity (ROE) under each of the three economic scenarios before any debt is issued. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)


ROE
Recession %
Normal %
Expansion %

a-2. Calculate the percentage changes in ROE when the economy expands or enters a recession. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to the nearest whole number, e.g., 32.)

  


% change in ROE
Recession %
Expansion %

Assume the firm goes through with the proposed recapitalization.
b-1. Calculate the return on equity (ROE) under each of the three economic scenarios. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

  


ROE
Recession %
Normal %
Expansion %

b-2. Calculate the percentage changes in ROE when the economy expands or enters a recession. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

  


% change in ROE
Recession %
Expansion %

Assume the firm has a tax rate of 35 percent.
c-1. Calculate return on equity (ROE) under each of the three economic scenarios before any debt is issued. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

  


ROE
Recession %
Normal %
Expansion %

c-2. Calculate the percentage changes in ROE when the economy expands or enters a recession. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to the nearest whole number, e.g., 32.)




% change in ROE
Recession %
Expansion %

c-3. Calculate the return on equity (ROE) under each of the three economic scenarios assuming the firm goes through with the recapitalization. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)




ROE
Recession %
Normal %
Expansion %

c-4. Given the recapitalization, calculate the percentage changes in ROE when the economy expands or enters a recession. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)




% change in ROE
Recession %
Expansion %

In: Finance