Question: can help answer this question with explanation ? 15. Assume that Rose Corporation's (RC) EBIT is not expected to grow in the future and that

can help answer this question with explanation ?

15. Assume that Rose Corporation's (RC) EBIT is not expected to grow in the future and that all earnings are paid out as dividends. RC is currently an all equity rm. It expects to generate earnings before interest and taxes (EBIT) of $6 million over the next year. Currently RC has 5 million shares outstanding and its stock is trading for a price of $12.00 per share. RC is considering borrowing $12 million at a rate of 6% and using the proceeds to repurchase shares at the current price of $12.00. Prior to any borrowing and share repurchase, the equity cost of capital for RC is closest to

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