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% expected rate of return. The stock price is $60 and the earnings per share are $12. If the company repurchases 50% of the stock and substitutes an equal value of debt yielding 8%, what is the expected earnings per share value after refinancing?

• A) $12.00
• B) $19.20
• C) $24.00
• D) None of the above

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Definitions:

Difficult Temperament

A behavioral profile characterized by high reactivity and difficulty adapting to changes or regulating emotions.

Slow-To-Warm-Up

A temperament trait describing individuals who are typically cautious and less engaging in new situations but gradually become more comfortable with exposure.

Phobic Disorder

A type of anxiety disorder characterized by an extreme, irrational fear of specific situations, objects, or activities, leading to avoidance behaviors.

Realistic Danger

A situation or condition that poses a genuine threat to a person's safety or well-being, requiring appropriate caution or action.