Lone Star Industries just issued $275,000 of perpetual 6 percent debt and used t

Question

Lone Star Industries just issued $275,000 of perpetual 6 percent debt and used the proceeds to repurchase stock. The company expects to generate $126,000 of earnings before interest and taxes in perpetuity. The company distributes all its earnings as dividends at the end of each year. The firm

Lone Star Industries just issued $275,000 of perpetual 6 percent debt and used the proceeds to repurchase stock. The company expects to generate $126,000 of earnings before interest and taxes in perpetuity. The company distributes all its earnings as dividends at the end of each year. The firm

Explanation / Answer

6 % perpetual debt $ 275,000

Perpetual EBIT   $ 126,000

The company distributes all its earnings as dividends at the end of each year.

Firm

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