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ABCO is an all-equity firm with 40,000 shares of stock outstanding at a market price of $50 a share. The company's earnings before interest and
ABCO is an all-equity firm with 40,000 shares of stock outstanding at a market price of $50 a share. The company's earnings before interest and taxes are $160,000. The manager has decided to add leverage to its financial operations by issuing $200,000 of debt at 7 percent interest and using the proceeds to repurchase shares of stock. Daouia owns 500 shares of ABCO's stock and can loan funds at 7 percent interest. How many shares of ABCO's stock must Daouia buy? Ignore taxes. A. None of them B. 450 shares C. 50 shares D. 125 shares ABCO is an all-equity firm with 40,000 shares of stock outstanding at a market price of $50 a share. The company's earnings before interest and taxes are $160,000. The manager has decided to add leverage to its financial operations by issuing $200,000 of debt at 7 percent interest and using the proceeds to repurchase shares of stock. Daouia owns 500 shares of ABCO's stock and can loan funds at 7 percent interest. How many shares of ABCO's stock must Daouia buy? Ignore taxes. A. None of them B. 450 shares C. 50 shares D. 125 shares
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