Marley's Is an Unlevered Firm with a Total Market Value

question 47

Multiple Choice

Marley's is an unlevered firm with a total market value of $220,000 and 5,000 shares of stock outstanding.The firm has expected EBIT of $10,000 if the economy is normal and $12,000 if the economy booms.The firm is considering a bond issue of $88,000 with an attached interest rate of 5.9 percent.The bond proceeds will be used to repurchase shares.Ignore taxes.What will be the earnings per share after the repurchase if the economy booms?

• A)$1.55
• B)$1.61
• C)$2.27
• D)$2.48
• E)$2.36

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Definitions:

Frontal

Pertaining to the front part of something, especially the frontal lobe of the human brain responsible for cognitive functions like decision making and problem-solving.

Auditory Hallucinations

Experiences of hearing voices or sounds that have no physical source in the external environment, often associated with certain mental health conditions.

Schizophrenia

A chronic brain disorder characterized by distorted thinking, perceptions, emotions, language, self-awareness, and behavior.

Temporal Lobes

Regions of the cerebral cortex located beneath the temples, involved in processing auditory information and crucial for memory, speech, and recognizing faces.