Learn and Earn Company Is Financed Entirely by Common Stock

question 53

Multiple Choice

Learn and Earn Company is financed entirely by common stock that is priced to offer a 20 percent expected rate of return. The stock price is $60 and the earnings per share are $12. If the company repurchases 50 percent of the stock and substitutes an equal value of debt yielding 8 percent, what is the expected earnings per share value after refinancing?

• A)$12.00
• B)$19.20
• C)$24.00
• D)$15.60

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Definitions:

Brain Waves

Oscillating electrical voltages in the brain that reflect different states of brain activity.

Actigraph

A device typically worn on the wrist that tracks movement and is often used to monitor sleep patterns and physical activity levels.

Wristwatch-Like Device

A portable, wearable gadget, typically electronic and worn on the wrist, resembling a watch but often capable of performing various functions beyond timekeeping.

Stress

A physical and emotional response to a challenge or demand, often perceived as a threat, which can affect mental and physical health.