A Firm Issues 100,000 Shares of Common Stock with a Total

question 82

Multiple Choice

A firm issues 100,000 shares of common stock with a total market value of $5,000,000 and an equal amount of debt.The firm is expected to generate $1.5 million in operating income and pay $250,000 in interest.If the firm does not pay tax,what will happen to EPS if the firm repurchases $3,750,000 of shares and substitutes an equal amount of debt?

• A) EPS decreases by 33.3% to $10.00.
• B) EPS stays at $12.50.
• C) EPS increases by 140% to $30.00.
• D) EPS increases by 240% to $42.50.

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Definitions:

Identity-Based Subgroup

A subgroup within a larger group defined by shared characteristics or identities, such as ethnicity, gender, or professional background.

Social-Group Based Identities

The aspects of an individual’s sense of self that are derived from their membership in social groups, such as cultural, ethnic, or professional groups.

X-Teams

represents a concept in organizational theory, emphasizing teams that are externally oriented, have flexible boundaries, and are highly networked.

Externally Oriented

describes an outward focus, typically pertaining to how organizations or individuals prioritize external factors or stakeholders in their decision-making processes.