MDM has a D/E ratio of.5, a P/E of 10, and $50,000 in outstanding debt. The debt is selling at par and the shares of stock are selling at $25 a share. How many shares of stock will be outstanding after MDM completes a $25,000 share repurchase program?

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MDM has $50,000 in debt and a D/E ratio of 0.5, meaning equity is $100,000. At $25 per share, there are 4,000 shares outstanding. Repurchasing $25,000 worth of shares at $25 each means buying back 1,000 shares, leaving 3,000 shares outstanding.

MDM Has a D/E Ratio Of