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The Board of New Age Inc. is planning to consider repurchasing (buy-back) $1,000,000 worth of common stock. The Board is planning to repurchase the shares at the prevailing market price. After much deliberation, the Board has decided to borrow the funds for the repurchase. Following is the information regarding the buy-back:
Prevailing price = $25
Number of shares outstanding before buy-back = 1,040,000
EPS prior to buy-back = $1.5 per share
After-tax cost of borrowing = 6%
What will be the EPS of New Age after the proposed buy-back?