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

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Sunrise, 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.