You Own 400 Shares of Kaiser

question 282

Multiple Choice

You own 400 shares of Kaiser. Kaiser is currently an all equity firm that has 12,000 shares of stock outstanding at a market price of $50 a share. The company's earnings before interest and taxes are $20,000. The dividend payout ratio is 100%. Kaiser has decided to issue $100,000 of debt at a 9% rate of interest. This $100,000 will be used to repurchase shares of stock. How many shares of Kaiser stock must you sell to unlever your position if you can loan out funds at a 9% rate of interest?

• A) 67 shares
• B) 100 shares
• C) 133 shares
• D) 160 shares
• E) 200 shares

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Definitions:

Bickering

Petty arguing or disputing often characterized by repetitive, trivial, and irritating exchange between individuals.

Family Bonds

Emotional connections between family members that provide support, love, and a sense of belonging.

Parental Monitoring

The actions taken by parents to be aware of their children's activities, peers, and whereabouts to guide their behavior.