Tree Farms, Inc. currently has 45,000 shares of stock outstanding and no debt. The price per share is $17.50. The firm is considering borrowing funds at 7.5 percent interest and using the proceeds to repurchase 3,000 shares of stock. Ignore taxes. How much is the firm borrowing?
A) $52,500
B) $75,000
C) $110,500
D) $125,000
E) $135,000

Question

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The firm is borrowing $52,500 to repurchase 3,000 shares of stock. The firm currently has 45,000 shares of stock outstanding and no debt. The price per share is $17.50. The firm is considering borrowing funds at 7.5 percent interest and using the proceeds to repurchase 3,000 shares of stock. The firm will need to borrow $52,500 to repurchase 3,000 shares of stock.