Clover Fields Is an All Equity fiRm with 55,000 Shares

question 352

Multiple Choice

Clover Fields is an all equity firm with 55,000 shares of stock outstanding at a market price of $17.50 a share. The company has earnings before interest and taxes of $115,500. Clover Fields
Decides to issue $350,000 of debt at an 8% rate of interest. The debt will be used to repurchase
Shares of the outstanding stock. Currently, you own 800 shares of Clover Fields stock. How many
Shares of this stock must you sell to unlever your position if you can lend out funds at an 8% rate of
Interest?

• A) 177 shares
• B) 209 shares
• C) 236 shares
• D) 274 shares
• E) 291 shares

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Definitions:

Private Wrongs

Actions or failures to act that violate the rights of individuals or specific groups, typically resulting in civil legal actions.

Eighth Amendment

Part of the United States Constitution, prohibiting the federal government from imposing excessive bail, excessive fines, or cruel and unusual punishments.

Bill Of Rights

The first ten amendments to the United States Constitution, guaranteeing fundamental rights and freedoms to American citizens.

Federal Government

The national government of a country, which holds the highest governmental authority, overseeing the entire nation’s affairs and operations.