The Hifalutin Co. has perpetual EBIT of $3,000. It has no debt in its capital structure, and
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Question:
The Hifalutin Co. has perpetual EBIT of $3,000. It has no debt in its capital structure, and its cost of equity is 15%. The corporate tax rate is 40%. There are 300 shares outstanding. Hifalutin has announced that it will borrow $3,750 in perpetual debt at 8% and use the proceeds to buy up stock.
How many shares will be purchased?
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93.75 shares.
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66.67 shares.
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50.00 shares.
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83.33 shares.
Related Book For
Advanced Accounting
ISBN: 9781260247824
14th Edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik
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