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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 equity cost of capital for RC is closest to:
Noncontrolling Interest
An ownership interest in a corporation where the stake does not offer majority voting rights, and the interest lies in the shares of subsidiaries not wholly owned by the parent.
Intra-entity Asset Transfers
Transactions involving the transfer of assets between divisions or units within the same entity.
Consolidated Sales
The total sales generated by a parent company and its subsidiaries, reported as one aggregated figure.
Intra-entity Transfers
Transactions involving assets, services, or funds between divisions, departments, or affiliates within the same entity.
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