East Side,Inc.has no debt outstanding and a total market value of $136,000.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 27 percent higher.If there is a recession,then EBIT will be 55 percent lower.East Side is considering a $54,000 debt issue with a 5 percent interest rate.The proceeds will be used to repurchase shares of stock.There are currently 2,000 shares outstanding.Ignore taxes.If the economy enters a recession,EPS will change by ____ percent as compared to a normal economy,assuming that the firm recapitalizes.

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Share price = $136,000/2,000 = $68Shares repurchased = $54,000/$68 = 794.117647Annual interest = $54,000 × 0.05 = $2,700EPS_Normal = ($12,000 - $2,700)/(2,000 - 794.117647) = $7.712195EPS_Recession = {[$12,000 × (1 - 0.55)] - $2,700}/(2,000 - 794.117647) = $2.239024Percentage change = ($2.239024 - $7.712195)/$7.712195 = -70.97 percent