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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.
-Following the borrowing of $12 million and subsequent share repurchase,the value of a share for RC is closest to:
Marginal Expenditure Curve
A graphical representation that shows how total expenditure changes as the quantity of a good or service purchased varies.
Economic Rents
Earnings in excess of the economically or socially necessary cost of bringing a factor of production into use.
Supply Curve
A graphical representation showing the relationship between the price of a good or service and the quantity of that good or service that a supplier is willing and able to supply.
Demand For Land
The desire, backed by purchasing power, for the use or ownership of land, which is influenced by various economic and societal factors.
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