naylor\'s is an all equity firm with 60000 shares of stock outstanding at a mark

Question

naylor's is an all equity firm with 60000 shares of stock outstanding at a market price of 50 a share. the copany has earnings before interest and taxes of 102000. naylor's has decided to issue 750000 of debt at 7.5 percent. the debt will be used to repurchase shares of the outstanding stock. currently, you own 500 shares of naylor's stock. how many shares of naylor's stock will you continue to own if you unlever this position? Assume you can loan out funds at 7.5 percent interest. ignore taxes

A. 322 shares

B. 350 shares

C. 362 shares

D. 425 shares

E. 502 shares

Explanation / Answer

i guess that 502 shares

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