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:

Pulmonary Trunk

The major blood vessel that carries blood from the heart's right ventricle to the lungs for oxygenation.

Superior Vena Cava

A large vein that carries deoxygenated blood from the upper half of the body to the heart.

Gap Junctions

Specialized intercellular connections between a multitude of animal cell-types that directly connect the cytoplasms of two cells, allowing various molecules, ions, and electrical impulses to directly pass through a regulated gate between cells.

Cardiac Muscle Cell

Specialized muscle cells found only in the heart, featuring unique properties such as automaticity and the ability to contract as a unit.