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multiple choice please help! CMR has no debt. The stock's beta, BE, is 1.5 and its expected profitability, RE, is 15%. The company decides to
multiple choice please help!
CMR has no debt. The stock's beta, BE, is 1.5 and its expected profitability, RE, is 15%. The company decides to go into debt at the risk-free rate, Rf, of 5% to buy back 50% of its shares. Capital markets are supposed to be perfect.
What is the effect of the share buyback on the PER (Price earning ratio)
a))PER will drop
b)No change in PER since the value of the firm does not change
c)PER will increase
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