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?

• 93.75 shares.

• 66.67 shares.

• 50.00 shares.

• 83.33 shares.

Answer rating: 100% (QA)

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