Use the Information for the Question(s)below

question 85

Multiple Choice

Use the information for the question(s) below.
Assume that Rose Corporation's (RC) EBIT is not expected to grow in the future and that all earnings are paid out as dividends.RC is currently an all-equity firm.It expects to generate earnings before interest and taxes (EBIT) of $6 million over the next year.Currently RC has 5 million shares outstanding and its stock is trading for a price of $12.00 per share.RC is considering borrowing $12 million at a rate of 6% and using the proceeds to repurchase shares at the current price of $12.00.
-Prior to any borrowing and share repurchase,RC's EPS is closest to:

• A)$0.60.
• B)$1.00.
• C)$1.20.
• D)$0.50.

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Definitions:

Parameter v

In statistics, it can refer to a parameter associated with a specific distribution or model, often used to denote degrees of freedom in certain distributions.

Variance V(t)

A statistical measure of the dispersion of a set of data points in a data series around the mean, denoted as V(t) when considering time-series data.

Number

A mathematical object used to count, measure, and label; the basic concept of numbers includes integers, real numbers, and complex numbers.

Normal Distribution

A balanced probability distribution centered around the mean, where data closer to the mean are seen more frequently than data considerably far from the mean.