Learn and Earn Company Is Financed Entirely by Common Stock

question 43

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)$15.60

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Definitions:

ISO 9000

A set of international standards on quality management and quality assurance developed to help companies effectively document the quality system elements to be implemented to maintain an efficient quality system.

Standardization

The process of developing and implementing technical standards to ensure consistency, safety, and interoperability of products or systems.

Ishikawa Diagram

A visual tool used to identify, explore, and display the possible causes of a specific problem, also known as a fishbone diagram.

Flowchart

represents a diagrammatic representation of a process or system, using standardized symbols to illustrate the sequence of steps, decisions, and paths toward completing a task or solving a problem.