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The Hifalutin Co. has perpetual EBIT of $3,000. It has no debt in its capital structure,...

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.

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jeff jeffy answered 2 years ago
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