Cross Town Cookies Is an All-Equity Firm with a Total

question 75

Multiple Choice

Cross Town Cookies is an all-equity firm with a total market value of $4,187,100.The firm has 127,500 shares of stock outstanding.Management is considering issuing $300,000 of debt at an interest rate of 6 percent and using the proceeds to repurchase shares.The projected earnings before interest and taxes are $215,600.What are the anticipated earnings per share if the debt is issued? Ignore taxes.(Round the number of shares repurchased down to the nearest whole share.)

• A)$1.59
• B)$1.76
• C)$1.38
• D)$1.67
• E)$1.47

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