Sunday Scaries Inc. is an all equity firm that is considering issuing $120 million of long-term debt to repurchase stock. What would be the firms D/E ratio? Use the information provided below:

A. .2

B. .5

C. 1

D. 2

II. How many shares outstanding will Sunday Scaries Inc. have when it completes its stock repurchase?

Current Structure Proposed Assets $360,000,000 $360,000,000 Debt $0 $120,000,000 Equity $360,000,000 $240,000,000 D/E Ratio .50 Interest Rate N/A Shares Outstanding 12,000,000 8,000,000 Share Price $30 $30 Current Structure Proposed Assets $360,000,000 $360,000,000 Debt $0 $120,000,000 Equity $360,000,000 $240,000,000 D/E Ratio .50 Interest Rate N/A Shares Outstanding 12,000,000 8,000,000 Share Price $30 $30