Use the Information for the Question(s)below

question 92

Essay

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.
-Show mathematically that the stock price of RC won't change following the debt issuance and share repurchase.

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Definitions:

Major Proteins

Essential, large molecules made up of amino acids that play critical roles in the body's structure, function, and regulation of tissues and organs.

Macrophages

A type of white blood cell that engulfs and digests cellular debris, foreign substances, microbes, and cancer cells in a process called phagocytosis.

Inflammation

The body's response to injury or infection, marked by redness, warmth, swelling, and pain.

Lymphatic Vessels

Thin-walled vessels structured similar to blood vessels, that carry lymph throughout the body, helping to rid the body of toxins and waste.