Can someone help me with this question? Thanks a lot A food company is a...
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Can someone help me with this question? Thanks a lot
A food company is a public traded company with a total of 55,000 shares outstanding and no debt.
The share price of the company is currently at $17.50. Its EBIT is $115,000. The company is considering issuing debt worth $350,000 with an interest rate of 8%, which would be used to purchase outstanding shares.
Currently, an investor owns 800 shares of the company.
How many shares of the company does the investor needs to sell in order to offset the leverage that the company is assuming? (You can lend out all the money you received from the stock sale at 8% interest rate).
MC OPTIONS :
A. 236 shares
B. 208 shares
C. 291 shares
D. 275 shares
E. 177 shares
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