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:

Cohesion

The action or fact of forming a united whole, often referring to the unity among members of a group or the sticking together of particles within a substance.

Explosive Growth

Refers to a rapid and substantial increase in the size or value of something, often used to describe fast-growing companies or economies.

Senior Management

The highest level of managers within an organization, responsible for setting strategic goals and making crucial business decisions.

Expansion Funding

Capital raised to support the growth initiatives of a business, which may include entering new markets or increasing production capacity.