assume that BB is considering changing from its original capital structure to a new capital structure with 45% debt and 55% equity.This results in a weighted average cost of capital equal to 10.4% and a new value of operations of $576,923.Assume BB raises $259,615 in new debt and purchases T-bills to hold until it makes the stock repurchase.BB 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?
A)11,001; $28.85
B)12,711; $35.62
C)13,901; $42.57
D)15,220; $54.31
E)17,105; $89.67

Question

Quizplus · Accepted Answer

The correct answer is A because the weighted average cost of capital is 10.4%, the new value of operations is $576,923, and the amount of new debt raised is $259,615. The number of shares remaining after the repurchase is 11,001, and the stock price per share immediately after the repurchase is $28.85.

Assume That BB Is Considering Changing from Its Original Capital