Use the Information for the Question(s)below

question 85

Multiple Choice

Use the information for the question(s) below.
Assume that Rose Corporation's (RC) EBIT is not expected to grow in the future and that all earnings are paid out as dividends.RC is currently an all-equity firm.It expects to generate earnings before interest and taxes (EBIT) of $6 million over the next year.Currently RC has 5 million shares outstanding and its stock is trading for a price of $12.00 per share.RC is considering borrowing $12 million at a rate of 6% and using the proceeds to repurchase shares at the current price of $12.00.
-Prior to any borrowing and share repurchase,RC's EPS is closest to:

• A)$0.60.
• B)$1.00.
• C)$1.20.
• D)$0.50.

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Definitions:

Operant Conditioning

A system of learning whereby the dynamism of a behavior is managed through the distribution of rewards or the assignment of penalties.

Mental Processes

The internal, covert activities of the mind, such as thinking, feeling, problem-solving, and decision-making.

Voluntary Behaviors

Actions that are performed as a result of conscious choice or decision.

Cognitive Learning

Learning that involves mental processes like thinking, knowing, remembering, and problem-solving, highlighting how we understand and apply knowledge.