Use the Information for the Question(s) Below

question 24

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.
-Following the borrowing of $12 million and the subsequent share repurchase,the number of shares that RC will have outstanding is closest to:

• A) 4.0 million
• B) 6.0 million
• C) 4.9 million
• D) 4.5 .million

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Definitions:

Charismatic Leadership

A leadership style characterized by an individual's ability to inspire, motivate, and capture the followership of others through their charisma and persuasive talents.

Charisma

A personal quality characterized by the ability to attract, influence, and inspire others through personal charm or appeal.

Innovation

The process of introducing new ideas, products, or methods to improve efficiency, effectiveness, or competitive advantage.

Economic Value

The worth of a good or service determined by the market, reflecting its ability to satisfy human needs or wants.