Learn and Earn Company Is Financed Entirely by Common Stock

question 23

Multiple Choice

Learn and Earn Company is financed entirely by common stock that is priced to offer a 20 percent expected rate of return.The stock price is $60 and the earnings per share are $12.If the company repurchases 50 percent of the stock and substitutes an equal value of debt yielding 8 percent, what is the expected earnings per share value after refinancing?

• A)$12
• B)$19.20
• C)$24
• D)$15.60

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Definitions:

First Impressions

Initial judgments and perceptions formed about an individual upon meeting, which significantly influence future interactions.

Asch

Refers to Solomon Asch, a psychologist known for conducting experiments on conformity, demonstrating how social pressure can influence individual judgment.

Cognition

The cognitive activity of gaining information and comprehension via thinking, experiencing, and sensory perception.

Thought

The mental process of considering, reasoning, or remembering; encompasses all aspects of conscious intellect and reflection.