Duke is a highly skilled negotiator who could work for many law firms. the law firm that hires duke is able to collect twice as much revenue per hour of duke's time than it can for any other negotiator in town. the increased revenue will:
a) be evenly split between duke and the law firm to maximize surplus.
b) all go to the law firm because the firm bears the risk of running the business.
c) all go to duke because, if it didn't, another firm could hire duke away.
d) be split between duke and the law firm, but how it will be split cannot be determined without more information.

Pennewell publishing inc. (pp) is a zero growth company. it currently has zero debt and its earnings before interest and taxes (ebit) are $80,000. pp's current cost of equity is 10%, and its tax rate is 40%. the firm has 10,000 shares of common stock outstanding selling at a price per share of $48.00. refer to the data for pennewell publishing inc. (pp). pp is considering changing its capital structure to one with 30% debt and 70% equity, based on market values. the debt would have an interest rate of 8%. the new funds would be used to repurchase stock. it is estimated that the increase in risk resulting from the added leverage would cause the required rate of return on equity to rise to 12%. if this plan were carried out, what would be pp's new value of operations? a. $484,359 b. $521,173 c. $584,653 d. $560,748 e. $487,805