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Author Question: Selected financial information for the Baltimore & Ohio Railroad Corporation (B&O) is provided in ... (Read 59 times)

Lobcity

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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 StructureCapital Structure
​CurrentProposed
EBIT$150,000 $150,000 
Debt, D0$1,500,000 
Cost of Debt, kd​N/A3%
Shares Outstanding100,000-
Stock Price$30.00 $30.00 

◦ 50,000
◦ 100,000
◦ 75,000
◦ 25,000
◦ 33,000
Corporate Finance Online ¦ Eakins, McNally ¦ 2nd Edition
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Marked as best answer by Lobcity on Apr 25, 2021

ryansturges

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Reply #1 on: Apr 25, 2021
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Lobcity

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Reply 2 on: Apr 25, 2021
Wow, this really help

Dnite

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Reply 3 on: Yesterday
Great answer, keep it coming :)

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