Marley's Is an Unlevered Firm with a Total Market Value

question 65

Multiple Choice

Marley's is an unlevered firm with a total market value of $180,000 with 4,000 shares of stock outstanding.The firm has expected EBIT of $6,500 if the economy is normal and $8,000 if the economy booms.The firm is considering a $67,500 bond issue with an attached interest rate of 6.5 percent.The bond proceeds will be used to repurchase shares.Ignore taxes.What will the earnings per share be after the repurchase if the economy booms?

• A)$1.552
• B)$1.610
• C)$1.445
• D)$3.200
• E)$2.905

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Definitions:

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Special Needs

Refers to individuals requiring additional or specialized services or accommodations due to physical, mental, emotional, or developmental conditions.

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