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:

Computerized Axial Tomography

An imaging procedure that uses a series of X-ray measurements taken from different angles to produce cross-sectional images of the body, often used in the diagnosis and treatment of neurological conditions.

Stroke

A medical condition that occurs when the blood supply to part of the brain is interrupted or reduced, causing brain cells to die and leading to sudden loss of function.

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A condition characterized by a significant decrease in the ability to remember and recall information from the past.

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The brain’s largest division and its most forward part.