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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:
Cohesiveness
A state of being united or working together in an unbreakable bond to achieve common aims within a group or team.
Boundaries
Limits that define individual or group identities, responsibilities, and areas of personal space or organizational territory.
Entitative
Pertaining to the perception or belief that a group is a distinct and coherent entity.
Unified
Being made or considered as a whole, typically in a context where there was previously division or separation.
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