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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