Jasper Industrial Has No Debt Outstanding and a Total Market

question 14

Multiple Choice

Jasper Industrial has no debt outstanding and a total market value of $110,000.Earnings before interest and taxes,EBIT,are projected to be $12,000 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.Jasper Industrial is considering a $35,000 debt issue with a 7 percent interest rate.The proceeds will be used to repurchase shares of stock.There are currently 7,500 shares outstanding.Ignore taxes for this problem.What is the percentage change in EPS when a normal economy slips into recession?

• A)-33 percent
• B)-25 percent
• C)-20 percent
• D)-16 percent
• E)-10 percent

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Definitions:

Implicit Memory

A type of long-term memory that enables us to perform tasks without conscious awareness of these previous experiences.

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Essay Tests

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Nonsense Syllables

Meaningless sets of two consonants, with a vowel sandwiched in between, that are used to study memory.