An All-Equity Firm as Operating Income of $1

question 43

Multiple Choice

An all-equity firm as operating income of $1.5 million and EPS of $2. If you ignore taxes, and if $1 million of 20% debt were issued with the proceeds used to repurchase two-thirds of the outstanding shares of stock, then the firm's EPS would:

• A) increase to $4.80.
• B) decrease to $3.00.
• C) decrease to $2.60.
• D)increase to $5.20.

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Definitions:

Alpha Thalassemia

A blood disorder that reduces the production of hemoglobin, leading to anemia.

Sarcoidosis

An inflammatory disease characterized by the formation of granulomas, small clumps of immune cells, in various organs in the body.

Lungs

Paired respiratory organs in the chest, responsible for gas exchange between the air and the blood, primarily oxygen intake and carbon dioxide expulsion.

SCID

Severe Combined Immunodeficiency, a rare genetic disorder characterized by the disturbed development of functional T cells and B cells caused by numerous genetic mutations, leading to severe immune system impairment.