Use the Information for the Question(s)below

question 11

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 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:

Political Realism

A theory in international relations focusing on power, self-interest, and the pragmatic aspects of politics, often prioritizing national security and interests over ideological concerns.

Allied Foreign

Countries or entities that are united with others through formal agreements, such as treaties, often for mutual defense or shared objectives.

Non-Democratic

Pertaining to a government or political system that does not follow the principles of democracy, often lacking free and fair elections or representation.

Ethnic Conflicts

Conflicts between different ethnic groups, often arising from issues of discrimination, cultural differences, or historical grievances.