The Projected EBIT of a fiRm Is $300,000

question 24

Multiple Choice

The projected EBIT of a firm is $300,000. The firm currently has 100,000 shares of common stock outstanding at a value of $18 per share. The firm has no debt. By how much will the ROE change if
The firm borrows $600,000 at 8% interest and uses the funds to repurchase shares of stock at the
Market price? Ignore taxes.

• A) -2.67%
• B) 1.67%
• C) 2.33%
• D) 4.33%
• E) 5.67%

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Definitions:

Nominal Data

Data that represents categories with labels or names, where the order of the categories is not meaningful.

Z-test

A statistical test used to determine whether two population means are different when the variances are known and the sample size is large.

Chi-square Test

A statistical test used to determine if there is a significant difference between the observed frequencies and the expected frequencies in one or more categories.

Chi-square Test

A chi-square test is a statistical test used to determine if there is a significant difference between the expected frequencies and the observed frequencies in one or more categories.