CCL Is an Unlevered Firm with a Total Market Value

question 1

Multiple Choice

CCL is an unlevered firm with a total market value of $448,000 with 28,000 shares of stock outstanding.The firm has expected EBIT of $27,500 if the economy is normal and $32,000 if the economy booms.The firm is considering a bond issue of $80,000 with an attached interest rate of 6 percent.The bond proceeds will be used to repurchase shares.The tax rate is 34 percent.What will the earnings per share be after the repurchase if the economy is normal?

• A)$1.333
• B)$1.860
• C)$1.950
• D)$1.038
• E)$.65

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Definitions:

Nonsense Syllables

Sequences of letters that do not form known words, used in memory and learning experiments to study the processes of encoding and recall.

Hermann Ebbinghaus

A German psychologist who is best known for his research on memory and the forgetting curve.

Sensory Storage

The shortest-term element of memory, which allows the retention of impressions of sensory information after the original stimuli have ended.

Constructive Processing

The way in which our memory reconstructs past events, often influenced by current knowledge, feelings, and thoughts.