Author Question: Selected financial information for the Baltimore & Ohio Railroad Corporation (B&O) is provided in ... (Read 22 times)

Lobcity · **on:** Apr 25, 2021

Selected financial information for the Baltimore & Ohio Railroad Corporation (B&O) is provided in the table below. B&O is currently all equity financed, but it is considering a leveraged capital structure, details of which are presented in the column labeled 'Proposed'. Under the proposed capital structure, B&O will use all of the new debt to repurchase (and cancel) shares. How many shares will be left outstanding after the repurchase, if B&O buys shares for $30.00 per share?

	Capital Structure	Capital Structure
	Current	Proposed
EBIT	$150,000	$150,000
Debt, D	0	$1,500,000
Cost of Debt, k_d	N/A	3%
Shares Outstanding	100,000	-
Stock Price	$30.00	$30.00

◦ 50,000
◦ 100,000
◦ 75,000
◦ 25,000
◦ 33,000

ryansturges · **Reply #1 on:** Apr 25, 2021

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