CCL Is an Unlevered Firm with a Total Market Value

Multiple Choice

CCL is an unlevered firm with a total market value of $448,000 with 28,000 shares of stock outstanding.The firm has expected EBIT of $27,500 if the economy is normal and $32,000 if the economy booms.The firm is considering a bond issue of $80,000 with an attached interest rate of 6 percent.The bond proceeds will be used to repurchase shares.The tax rate is 34 percent.What will the earnings per share be after the repurchase if the economy is normal?

A) $1.333
B) $1.860
C) $1.950
D) $1.038
E) $.65