Fruits of Doom has expected perpetual EBIT of $285,000 and no debt in its capital structure. Its cost of equity is 15% and the corporate tax rate is 21%. Fruits of Doom is planning to borrow $950,000 next year at an interest rate of 3.1%. What is the current value of Fruits of Doom?

A. $1,530,450 B. $1,929,450 C. $1,501,000

Kentucky Nuggets Inc. has the same market value and book value. Currently, the company has cash of $4,000 and total assets of $100,000. Kentucky Nuggetss stock is worth $100,000 and the company has 2,000 common shares outstanding. Furthermore, the companys net income equals $11,000. What will the EPS be if Kentucky Nuggets uses its entire cash to complete a buyback of some of its common shares?

A.

$5.73

B.

$1.14

C.

$5.50