Business, 18.12.2019 02:31 juls68

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 25%. 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). assume that pp is considering changing from its original capital structure to a new capital structure with 35% debt and 65% equity. this results in a weighted average cost of capital equal to 9.125% and a new value of operations of $657,534. assume pp raises $230,137 in new debt and purchases t-bills to hold until it makes the stock repurchase. pp then sells the t-bills and uses the proceeds to repurchase stock. how many shares remain after the repurchase, and what is the stock price per share immediately after the repurchase?

remaining shares; p post

a. 7,000; $74.26
b. 6,500; $65.75
c. 7,500; $86.18
d. 6,959; $58.03
e. 6,649; $63.48

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Pennewell publishing inc. (pp) is a zero growth company. it currently has zero debt and its earnings...

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